Market Funds Attract Cash

Money is pouring into investment trust companies' money market funds where it is being invested in short-term debt instruments, such as acceptances, commercial paper and negotiable certificates of deposits.

According to the Korea Investment Trust Companies Association on Wednesday, the money market funds' balance has jumped to 37.87 trillion won ($30 billion), up 11 trillion won from December last year.

The money market funds are gaining popularity because investors have easy access to their cash. The funds' annual yield is 6 percent no matter when it is withdrawn. To the contrary, the banks offer an annual rate of 5 percent on savings instruments with one-year maturity, and if customers withdraw all their money early, the annual rate falls to 1 percent, according to an official at the trust companies association.

Another advantage of money market funds is that even if their invested bonds are dishonored, investors will suffer no loss on the original investment as long as they withdraw their money on the date of dishonor.

"Investors are putting their money into the funds because of the current unstable stock and bond markets," said an official at Korea Investment Trust Management & Securities. "The money market funds are the most competitive short-term products available in the market, " he said.

by Chung Jae-hong