«Money market = zero risk» is one of the most widespread beliefs among investors — and one of the most mistaken. Let’s take the best-known money-market ETF, Xeon, and look at it with real data: what it is, what it costs, and why it too can lose — slowly, for years.
1. What a money-market ETF is (and what Xeon is)
A money-market ETF is a tool to «park» cash: it tracks a very short-term interest rate — the money-market rate. Xeon — Xtrackers II EUR Overnight Rate Swap UCITS ETF 1C (ISIN LU0290358497) — tracks €STR, the euro overnight rate (the cost of money «from tonight to tomorrow» in the euro area). It’s accumulating (it reinvests, it doesn’t pay coupons) and has been on the market since 2007.
2. How it earns — and why it can turn negative
Xeon tracks the Solactive €STR +8.5 bps index: in practice it earns the euro overnight rate plus 0.085% a year. When €STR is high — as from 2022 onward — it yields. But when €STR is low or even negative (as it was from 2015 to mid-2022, in the years the ECB held rates below zero), the gross yield is close to zero or negative. And after subtracting the fund’s cost (the TER), the value falls. That’s why «money market» doesn’t mean «can’t lose».
3. The numbers, from the official factsheet
| Item | Value |
|---|---|
| ISIN | LU0290358497 |
| TER (annual cost) | 0.10% |
| Assets (AUM) | over €20 billion |
| Replication | Synthetic (swap) |
| Income | Accumulating |
| Index | Solactive €STR +8.5 bps |
| Launch | 2007 |
Two things matter most. First: the cost is low (0.10% a year) and the fund is huge (over €20 billion), so very liquid. Second, and this is the least visible risk: replication is synthetic. Xeon doesn’t actually buy the securities; it obtains the return through a swap with a bank. Upside: efficiency. Risk: if that counterparty doesn’t pay — so-called counterparty risk — there’s a danger (mitigated by collateral, but present). Source for the fund data: Xtrackers factsheet, 29/05/2026.
4. The risk few people look at: years underwater
The theory is clear; the data is clearer. See it for yourself below: how far Xeon stayed below its previous peak over time. Pick a country and switch between nominal and the real (inflation-adjusted) return.
In euro the nominal fall is modest (about −3.7%), but it lasted almost a decade. The real blow is after inflation: purchasing power dropped by more than 25% and still hasn’t recovered. And for someone thinking in another currency the exchange-rate effect can weigh far more — try Switzerland, for example.
5. Costs, tax and inflation: the real return
A money-market fund’s gross return faces three bites: the TER (0.10%), tax and inflation. Tax depends on where you’re tax-resident — check your local rules. In Italy, for example, ETF capital gains are taxed at 26%, with a reduced 12.5% on the share invested in «white-list» government bonds; for Xeon that currently works out at an effective rate of around 15.5% (the white-list share is updated every six months). When returns are small, though, TER + tax + inflation together can still wipe out — or turn negative — the real gain. Whatever figure your own broker or bank applies is what you’ll actually be charged — even if it differs — so it’s worth checking there too.
Try it yourself, changing the values:
Enter a low gross yield (as in the zero-rate years) and watch what happens: after costs, tax and inflation, the real return drops below zero. That’s where the «safe parking spot» quietly costs you purchasing power.
In short
A money-market ETF is for parking cash; it isn’t a machine that can’t lose. At low rates, after costs, tax and inflation, the real return can be negative — and can stay so for years. «Low risk» doesn’t mean «no risk».