Funds Searching for Bottom Rush into North American Funds

Net Inflow of 569.6 Billion KRW Over 3 Months into 94 North American Stock Funds

3-Month Return -7.36%
Returns Not Attractive Now but Fund Inflows Expected on Rebound Hopes Next Year

[Asia Economy Reporter Minji Lee] Despite intensified capital outflows in the fund market due to this year's global stock market downturn, investor interest in North American funds appears to be growing. Although the returns are not particularly strong compared to the domestic stock market or funds from other countries, investors are focusing on buying at low prices and concentrating on future rebound momentum.

According to financial information provider FnGuide as of the previous day, 94 funds investing in North American stocks saw a net inflow of 569.6 billion KRW over the past three months. By region, North American funds were the only ones to receive capital inflows during this period. Considering that the total net asset value of regional equity funds was 445.5 billion KRW during this time, most of the capital came through North American funds. Throughout this year, capital inflows into North American funds have continued, with 883 billion KRW over six months and 3.698 trillion KRW since the beginning of the year.

Looking at individual funds, North American equity funds ranked among the largest in terms of net asset inflows. The ‘AB US Growth Fund’ (26 billion KRW) attracted the most capital among North American funds and ranked third overall in net inflow size. This fund is the third largest overseas equity fund by net assets (961 billion KRW). It holds large-cap growth stocks in the U.S. and even surpassed 2 trillion KRW in net assets last year. Although the fund’s net asset size shrank significantly due to the Nasdaq Composite Index plummeting amid rapid interest rate hikes, recent expectations of an index rebound have led to an increase in fund investment size. The fund’s top holdings include Microsoft (8.68%), Visa (6.12%), Alphabet (5.9%), UnitedHealth Group (5.69%), Vertex Pharmaceuticals (4.26%), Zoetis (3.44%), and Home Depot (3.35%).

Additionally, to manage stable returns, capital inflows continued into asset allocation and dividend-related funds, including Mirae Asset US Index EMP Fund (15.1 billion KRW), Korea Investment US Dividend Aristocrats Fund (9 billion KRW), Kiwoom Smart 4th Industrial Revolution ETF Dollar-Cost Averaging Fund (6.7 billion KRW), and KB Star US S&P 500 Index Fund (6.6 billion KRW).

In fact, purely in terms of returns, there is little appeal. North American funds recorded a 7.36% decline over the past three months, underperforming other funds. This is worse than European stocks (4.14%), Latin America (-2.86%), Southeast Asia (-3.47%), and global stocks (-6.10%). The Federal Reserve’s interest rate hikes have suppressed the stock market, and as U.S. companies reflected recession concerns, the index decline deepened. However, individual investors interpret this as an opportunity to buy U.S. stocks more cheaply in the long term and continue investing.

Securities experts are also supporting individual investors’ sentiment. They analyze that if North American stocks are held long-term, returns could improve next year. Hujeong Kim, a researcher at Yuanta Securities, explained, “While concerns about a recession may cause North American equity fund investors to face difficult times until the first half of next year, from a long-term fund investor perspective, this period should be used as a buying opportunity at low prices.”

The currently expected timing for a rebound in North American stock returns is after the first half of next year. Bowon Choi, a researcher at Korea Investment & Securities, analyzed, “Until early next year, interest rate issues will persist, drawing attention mainly to value stocks, consumer staples, and healthcare sectors where entry barriers have lowered. In the second half of the year, as European economic uncertainties decrease and global demand recovers, a recovery is expected in growth stocks, IT, and industrial sectors that experienced significant declines this year.”