'Overseas Funds Favoring the US Over China Ignite Interest'

[Image source=Getty Images Bank]

[Asia Economy Reporter Hwang Junho] The interest of Seohak Gaemi, who had invested in U.S. tech stocks such as Tesla and Apple, has shifted to overseas investment funds. Although overseas investment funds centered on China and emerging markets gained attention due to the financial crisis, the active participation of these investors has brought the U.S., especially tech stocks, to the forefront as a new investment destination.

According to the Korea Financial Investment Association on the 28th, the net assets of domestic overseas investment funds reached 55.5958 trillion won, a 12% increase compared to the end of last year. There are five funds with net assets reaching 1 trillion won each.

Their main investment destination is the United States. Fidelity Global Dividend Income has net assets of 2.7558 trillion won and reinvests in overseas funds investing in companies such as Microsoft, Apple, Visa, Alphabet, and Intel. AB Growth with 1.4835 trillion won and Korea Investment Global Electric Vehicle & Battery with 1.2608 trillion won mainly invest in U.S. companies. Products like Mirae Asset TIGER Nasdaq 100 (721.6 billion won) and Samsung KODEX U.S. FANG Plus (539.3 billion won) also invest in U.S. information technology companies.

In fact, the U.S. lost its appeal as an investment destination after the financial crisis. The financial crisis also played a role in the boom of indirect investments in China and emerging markets, which, despite risks, offered relatively high returns. Even now, products like Mirae Asset China Growth attract funds amounting to 957.8 billion won.

However, after COVID-19, interest in information technology sectors such as non-face-to-face services in developed countries has increased, making the U.S. a new investment destination. Especially since 2015, target-date funds (TDFs), which have emerged as a new alternative for retirement assets, have led to a monthly inflow of 4.4 trillion won into overseas stock funds since October last year. The fact that exchange-traded funds (ETFs), which can be traded as easily as stocks, are being created one after another also helps activate U.S. investment funds. Among the top 15 overseas stock funds, three are ETFs.

Kim Hoo-jung, a researcher at Yuanta Securities, said, "Recently, a virtuous cycle has been created where experience in direct overseas stock investment leads to indirect overseas stock investment," adding, "Diversification of investment assets can be of great long-term help to investors' asset management."