Large Sums Flow into Funds... MMF Soars 45%

First Half Subscription Amount Up 7.4%
MMF Hits Record High with 152 Trillion Inflow... Massive Waiting Funds Due to Corona
Special Assets and Real Estate Types Slow Down
Bond and Stock Types Struggle Due to Redemptions

[Asia Economy Reporter Song Hwajeong] The fund assets under management in the first half of this year increased by 7.4% compared to the end of last year. In particular, due to the impact of the novel coronavirus disease (COVID-19) situation, standby funds poured in, leading to a significant increase in money market funds (MMFs).

According to Shin Young Securities on the 17th, as of the end of last month, the total domestic fund assets under management recorded 700.3 trillion KRW, up 7.4% from the end of the previous year. Since the beginning of the year, MMFs, fund of funds, real estate funds, and special asset funds have shown an increasing trend, driving the overall growth in fund assets under management.

The increase in MMFs was particularly notable. MMF assets under management rose by 45% since the beginning of the year, reaching an all-time high of 152 trillion KRW. Researcher Oh Kwangyoung of Shin Young Securities analyzed, "MMF assets under management turned to an increasing trend this year due to inflows of funds at the beginning of the year and corporate surplus funds. Especially after February, due to COVID-19, funds that were delayed in investment or could not find investment destinations flowed in massively, continuing the upward trend. Subsequently, as global asset prices plummeted due to COVID-19, standby investment funds also poured in massively, resulting in a sharp increase."

Special asset funds increased by 4.8027 trillion KRW since the beginning of the year, maintaining an increase for 31 consecutive months. However, the growth rate since the beginning of this year slowed to 5.2% compared to last year's increase rate of 31.2%. Real estate funds also continued to grow, but their performance was sluggish compared to the high growth seen until last year. Real estate funds increased by 5.2 trillion KRW since the beginning of the year, recording a growth rate of 5.4%. In April, they even recorded a monthly decline for the first time in 54 months. Researcher Oh explained, "Real estate funds showed a high growth rate of 30.2% last year and an average of 29.1% over the past three years, but concerns have increased recently due to the disclosure of several fund insolvencies and COVID-19."

Bond funds showed an increasing trend along with the strong bond market since the beginning of the year but turned to a decline in March due to the impact of COVID-19. With the global financial market instability caused by the spread of COVID-19, issues of cash securing emerged, leading to increased redemptions and a decrease of 3.7 trillion KRW compared to the beginning of the year. Additionally, mixed asset funds decreased by 325.8 billion KRW, marking their first decline since 2015.

Regarding the flow of funds into domestic equity funds, thanks to large inflows into exchange-traded funds (ETFs) in the second half of last year, there was a net inflow of 3 trillion KRW, returning to net inflow within the first quarter. However, this year, 6.8194 trillion KRW flowed out, turning back to net outflow. The domestic stock market, which started the year on an upward trend due to easing US-China trade tensions and expectations of export recovery, sharply declined due to COVID-19. Although it rebounded thanks to large-scale government stimulus measures, better-than-expected corporate first-quarter earnings, and inflows of investment funds mainly from individuals, redemptions increased significantly more than new investments.

For overseas funds, North American and European funds showed an increasing trend, while Chinese funds declined. Global fund assets under management increased by 792.2 billion KRW, showing six consecutive months of growth, as funds flowed into various global funds including global tech funds and global consumer funds. North American funds saw inflows centered on growth stock funds, index funds tracking the US Nasdaq or S&P 500 indices, and S&P oil-producing company index funds, increasing by 677.4 billion KRW. This marked seven consecutive months of monthly growth. European funds also saw inflows since the beginning of the year, increasing assets under management by 59.5 billion KRW. Some emerging market funds such as Russia, Brazil, and emerging Asia also showed growth due to bargain-hunting funds. On the other hand, Chinese funds, which had been continuously declining since February last year, continued to see outflows every month except April this year, decreasing by 543.5 billion KRW since the beginning of the year. Vietnam funds, which were the only ones to show an increase in assets under management last year, recorded a decrease of 57.1 billion KRW this year due to rising COVID-19 concerns.

The fund market is expected to continue growing in the second half of the year. Researcher Oh said, "In the second half, growth in private equity funds and overseas funds will improve due to increases in alternative investments including real estate. Interest will expand not only in domestic and international growth stocks and sector funds, which were highlighted in the first half, but also in various types of funds such as public offering stocks, dividend stocks, and ESG (environmental, social responsibility, governance). The domestic fund market will continue to grow. However, MMFs, which increased sharply in the first half, will decline somewhat, and mixed asset funds including Korean-style hedge funds will continue to experience sluggish fund flows."

This content was produced with the assistance of AI translation services.