'MMF' Leading the Fund Market in the First Half of the Year

Total Fund Assets 772.9 Trillion
11.2% Growth, Highest Since 2008
MMF Hits Record 165 Trillion in May
Soars 31% Since Start of Year

[Asia Economy Reporter Song Hwajeong] This year’s first half saw the KOSPI reach an all-time high, and with the stock market continuing its strong performance from last year, the fund market also experienced its largest growth since 2008.

According to Shin Young Securities on the 17th, the total assets under management in the domestic fund market reached 772.9 trillion KRW in the first half, marking an 11.2% increase compared to the end of the previous year. This is the highest growth rate for the first half since 2008. This growth was driven by inflows into money market funds (MMFs), bond funds, ESG funds, and public offering funds. In particular, MMFs led the growth in the fund market during the first half by hitting record highs due to market liquidity and investment standby funds inflows.

MMF assets under management grew by 31% since the beginning of the year, reaching a record high of 165 trillion KRW at the end of May. The increase began with inflows of funds at the start of the year and corporate surplus funds, and continued into February with additional market liquidity inflows, approaching 165 trillion KRW. In March, outflows due to quarter-end funds and corporate demand caused the amount to temporarily fall below 140 trillion KRW. However, in April, inflows at the beginning of the quarter pushed the total above 168 trillion KRW. In May, large inflows from market liquidity, investment standby funds, and government policy funds resulted in a record high of 179.7 trillion KRW.

Bond funds also showed strong performance. Assets under management in bond funds increased by 13.4%, marking two consecutive half-year periods of growth following the second half of last year. Domestic bond funds increased by more than 15 trillion KRW, while overseas bond funds saw a slight decrease. Additionally, mixed-asset funds increased by 3.7536 trillion KRW, turning to growth for the first time since last year.

Researcher Oh Kwangyoung of Shin Young Securities stated, "Looking at the fund market in the first half, private equity funds continued to slow down following last year, and overseas funds, which had maintained higher growth rates compared to domestic funds, also showed a slowdown. On the other hand, MMF assets under management increased significantly due to investment standby funds and an increase in idle market funds." Private equity funds grew by about 24 trillion KRW in the first half, recording a low growth rate of 5.5% compared to the end of last year. Although this is an improvement from the 1.4% growth in the first half of last year, which was negatively impacted by COVID-19, it falls far short of the 23.5% growth rate seen during the peak year of 2019. Conversely, public offering funds grew by 21% in the first half, mainly driven by MMFs and bond funds, marking the highest first-half growth rate since statistics began in 2004. Researcher Oh analyzed, "The slowdown in private equity fund growth is due to the expansion of negative perceptions caused by various private equity fund-related issues such as the Lime incident, the German DLF incident, and the Optimus incident, as well as the impact of COVID-19, which particularly slowed growth in private alternative investments such as real estate and special assets."

The fund market in the second half is expected to improve compared to the first half as the year progresses. Interest in ESG and public offering funds is expected to continue, and private equity funds and overseas funds are also anticipated to recover. Researcher Oh said, "In the second half, as COVID-19 vaccination expands in terms of countries and coverage, alternative investment areas including real estate will gradually recover, giving momentum to the growth of private equity and overseas funds. In addition to ESG and public offering funds, which attracted attention in the first half, interest will expand to a wider variety of fund types such as green growth funds and dividend stock funds, sustaining growth."