[Asia Economy Reporter Lee Jung-yoon] It has been identified that the net asset value of North American funds surged as the won-dollar exchange rate soared.
According to financial information company FnGuide on the 2nd, among funds with a net asset value of over 1 billion KRW as of the 29th of last month, the net asset value of 91 North American equity funds increased by 3.5407 trillion KRW since the beginning of the year. During the same period, the total increase in net asset value of equity funds across all regions was 4.0314 trillion KRW, with most of the increase coming from North American funds.
Among overseas equity funds this year, the net asset value of European products decreased by 53.1 billion KRW, and Asia, Latin America, and emerging markets also showed a declining trend.
The net asset value of 32 North American bond funds increased by 532.4 billion KRW, exceeding the total increase of 482.2 billion KRW in bond funds across all regions. The net asset value of Asian bond funds decreased by 29.7 billion KRW, and emerging markets and Latin America decreased by 19.1 billion KRW and 1.4 billion KRW, respectively.
The increase in the net asset value of North American funds is interpreted as a result of the recent high-level won-dollar exchange rate. Apart from new investment inflows into North American funds, the rise in the dollar’s value also increased the net asset value when converted into Korean won.
However, despite the strong dollar, the U.S. stock market has recorded weakness, resulting in poor returns for North American funds. As of the 29th of last month (local time), the Dow Jones Industrial Average fell 19.57% since the beginning of the year. The Standard & Poor’s (S&P) 500 Index and the tech-heavy Nasdaq Index also dropped 23.62% and 31.37%, respectively. North American equity funds recorded a 19.92% loss since the start of the year, which is not significantly different from the overall regional equity fund return of -20.67%. In fact, Latin American products posted a 6.46% gain.
During the same period, North American bond funds earned 3.69%, outperforming the overall return of -0.45%. However, with recent increased exchange rate volatility, funds exposed to currency risk likely experienced relatively smaller losses. Unlike currency-hedged funds that eliminate exchange rate impact, currency-exposed funds are affected by exchange rate fluctuations. In a strong dollar environment, currency-exposed products that can defend returns through currency gains are advantageous for investors.
In fact, among the 'Korea Investment U.S. Dividend Aristocrats Securities Investment Trust' funds investing in North American stocks, all currency-hedged products recorded losses in the 16% range since the beginning of the year, while currency-exposed products did not record losses.
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