Interest in money market funds in Singapore up 3 times in Q2 despite T-bill yields retreating
CPFIS-included funds overall Q2 performance stands at 3.16%
[SINGAPORE] Total flows into Singapore-registered funds for the first half of 2025 were recorded at S$6.3 billion, with close to 60 per cent of them going to money market funds, a FundSingapore/Morningstar Q2 report indicated.
The funds recorded net inflows of S$4.1 billion in the second quarter this year, up 86 per cent from the previous quarter.
Data showed that interest in money market funds grew three-fold compared to the previous quarter, with net inflows of S$2.8 billion. This, to Arvind Subramanian, senior analyst of manager research at Morningstar, is “surprising”, as T-bill levels have retreated to all-time lows lately, he said on Tuesday (Sep 2).
Other kinds of money market funds – which are mutual funds that invest in short-term, low-risk debt securities – besides T-bills, are corporate bonds or municipal debt.
Subramanian explained that investors’ choice of money market funds is likely not a yield-driven decision, but simply because they “do not see another option” amid market uncertainty caused by recent tariffs imposed by US President Donald Trump, and broader geopolitical tensions.
“In a more stable market, however, they may be more cognisant of how low current yield levels are, and possibly shift gears to long-term investments like equity or fixed income,” he explained.
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Within the category, Asia money market took the lead with net inflows of over S$2 billion, followed by money market miscellaneous with S$568.8 million, and US money market at S$168.3 million in net inflows.
Fixed income funds are the next top category of funds, which attracted S$918.7 million worth of fresh funds. Allocation strategies came in third, with net inflows of S$318.5 million.
The analysts noted that the Asia fixed income category in Singapore also took first place as the most attractive asset class to investors, with net inflows of S$810.3 million. Global fixed income was in second place, recording about S$218.9 million in net inflows. Conversely, US and Europe fixed income were ignored by many investors.
Meanwhile, interest in equity funds waned, falling from S$397.1 million to S$80.9 million in Q2.
As for interest in Singapore equity within Singapore, it stabilised after a three-fold increase in the first quarter of 2025, with S$247.2 million of inflows going to Singapore equity in Q2.
CPFIS-included funds’ performance
The overall performance of CPFIS-included funds for Q2 2025 was at 3.16 per cent, the report indicated.
The performance of benchmark indices was mixed, with the MSCI World Index returning about 5.6 per cent, and the FTSE WGBI Index delivering negative returns of 0.9 per cent.
CPFIS-included funds sustained “solid growth across the board” over a one-year period, said Morningstar analysts, with ILPs and unit trusts gaining close to 6 per cent and 6.2 per cent, respectively. Overall, all CPFIS funds posted gains of around 6.1 per cent.
Outlook
The volatile start to Q2 with Trump’s tariff announcement may have eased with the recent 90-day pause – but analysts still see trade discussions “continuing to unfold”.
“We suggest investors rebalance their portfolios and take profit in overvalued names,” said the analysts in their report. “If investors can look beyond the current consumer downcycle, we believe there is value for not only moat companies with strong advantage over competitors, but also high dividend yielders.”
Consumer recovery may take longer to develop, and any fiscal measures announced could provide an “outsized boost” as these names remain underweight, they added.
As for money market funds which have dominated the interests of Singapore investors in H1 this year, Morningstar’s Subramanian is sceptical that this hype will extend to the rest of 2025.
“If market volatility subsides, as it seems we’ve seen the worst of it, I’d be surprised if money market funds continue to see these levels of returns,” he said. “It pays very little for investors today to hold money in (this investment class).”
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