Financial Blog

As 2024 draws to a close, we find ourselves facing a number of uncertainties that are impacting both local and global markets. Concerns about inflation, economic growth, and geopolitical tensions have been haunting investors throughout the year, and it looks like these issues will continue to shape the financial landscape in 2025.

Increased uncertainty often leads to heightened market volatility, which makes it difficult for investors to decide on where to place their money.

Fortunately, Security Bank’s money market funds, specifically the SB Peso Money Market Fund (MMF) and SB Peso Cash Management Fund (CMF), are viable options for those looking for stability amidst these uncertain times.

How are there money market funds performing?

With interest rates still relatively elevated, Security Bank’s money market funds are providing solid returns without requiring investors to take on significant risk. On a year-to-date (YTD) basis, the CMF has a return of 4.48%, while the MMF has a return of 4.24%*. These good returns are largely due to BSP Bills, which make up over 80% of the CMF and about 35% of the MMF. BSP Bills are high yielding short-term securities that mature in 28 to 56 days, making these money market funds highly liquid while still offering attractive returns.

The CMF is ideal for investors looking for a place to park their cash for 6 months or less, while the MMF is better suited for those seeking to grow their money over a year. The MMF also has exposure to government securities with 1–3-year maturities, which introduces some additional risk. This added risk gives the MMF the potential for higher returns, but since 2024 has been a volatile year for interest rates, its returns have slightly lagged behind those of the CMF.

How do these returns stack up against our investment options?

Let’s compare them to Security Bank’s Peso Bond Fund (PBF) and Philippine Equity Index Fund (EIF). Year-to-date, the PBF has a return of 4.06%, while the EIF has a return of 9.68%. Looking solely at the YTD figures, the CMF and MMF have slightly outperformed the PBF but have underperformed the EIF.

However, the path to reaching these returns has been much smoother for the money market funds compared to the more volatile bond and equity funds. To illustrate this, let’s look at the quarterly returns for each fund in 2024:

As shown above, the money market funds have been able to weather the market volatility that has led to large swings in the bond and equity markets. Even though money market funds are generally conservative investments, the high-interest rate environment has allowed them to provide stable and reasonable returns.

Will these returns continue to be as strong and stable in 2025?

While no one can predict the future with certainty, the money market funds remain a solid option for investors seeking low-risk, liquid investments in an uncertain economic environment. Although central banks are expected to lower policy rates throughout 2025, which should lead to a lower interest rate environment, the pace of these cuts remains uncertain due to ongoing concerns on inflation as well as political and geo-political factors. These uncertainties may lead to similar market fluctuations we’ve seen in 2024. Therefore, Security Bank’s CMF and MMF may be the best options for stable and solid returns amidst these uncertainties.

*Fund Performance as of November 20, 2024