"Investors Flock to MMFs to Avoid Surging Stock Market Volatility"

MMF Assets Near 250 Trillion Won
Short-Term Fund ETFs Surge in a Short Period
U.S. MMF Assets Exceed $8 Trillion

As the war in the Middle East drags on, market volatility has increased, prompting investors to turn to money market funds (MMFs) as a means of risk aversion. With not only stocks but even gold—long considered a safe haven—experiencing instability, investors appear to be adopting a parking strategy, temporarily pulling money out of riskier assets.

According to the Korea Financial Investment Association on March 24, the total amount of money market funds set up domestically reached 248.0522 trillion won as of March 19. Of this, individuals accounted for 2.3852 trillion won, while corporate investors made up 225.6669 trillion won. Prior to the outbreak of war, on February 27, MMF balances stood at 231.9704 trillion won, but by March 4, they had surpassed 240 trillion won, marking an increase of over 16 trillion won in a short period.

MMFs are funds that invest in short-term financial products such as short-term government bonds, commercial paper (CP), and certificates of deposit (CD). With flexible deposits and withdrawals and the ability to earn interest even for just one day, MMFs serve as a “short-term parking account” where funds can be temporarily held.

Large amounts of capital are also flowing into money market ETFs, which are designed based on MMF management methods. According to Koscom ETF Check, as of March 23, money market ETFs ranked among the top in terms of net capital inflows over the past week. RISE Money Market Active ranked sixth (126.5 billion won), KODEX Money Market Active tenth (83.2 billion won), and TIGER Money Market Active eleventh (79.2 billion won). During the same period, short-term fund-type ETFs, including money market ETFs, saw their net assets increase by 508.4 billion won, marking the largest inflow among all ETF types except for equity ETFs.

Industry experts believe that, given the high volatility caused by the Middle East war, investors are seeking more stable investment options. Kwan-Yeol Baek, a researcher at LS Securities, commented on the fund market last week, saying, "Caution about persistent inflation and risk aversion sentiment continues. With increased geopolitical risks, demand for safe assets has grown, leading to larger inflows into MMFs, and net capital flows into won-denominated MMFs have also turned positive."

In the United States, a similar shift toward MMFs is being observed. Major foreign media have reported that the size of U.S. MMFs surpassed $8 trillion (approximately 1,208.9 trillion won) this month. While exact figures vary by data provider, experts agree that uncertainty originating from the Middle East has driven MMF balances to record levels. Sweta Singh, founding partner at City Different Investments, explained, "Wait-and-see money is piling up in MMFs under the current circumstances."

Particularly, as stock market volatility has increased and even gold—previously regarded as a safe asset—has seen its price drop, demand for "even safer assets" has grown. According to Bloomberg, gold prices fell by about 11% last week, marking the largest weekly decline since 1983. In its weekly market commentary, the BlackRock Investment Institute noted the surge in oil prices due to the Strait of Hormuz blockade, stating, "There are very few ways to escape a short-term supply shock," and added, "In a falling stock market, government bonds and gold are failing to provide stability."

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