H1 Fund Market Net Assets Up 10% YoY... Led by ETFs

The fund market size in the first half of this year increased by nearly 100 trillion won compared to the end of last year. Exchange-Traded Funds (ETFs) led the growth.

On the 10th, the Korea Financial Investment Association announced the '2024 First Half Fund Market Trends,' reporting that the total fund market size in the first half of this year reached 1,069.5 trillion won. This represents an increase of 98.1 trillion won (10.1%) compared to the end of last year.

There was a net inflow of 7.9 trillion won into overseas equity funds. The net asset value increased by 16 trillion won (39.4%) from the end of the previous year to 56.7 trillion won. The value of semiconductor-related stocks rose significantly amid the artificial intelligence (AI) boom. The Korea Financial Investment Association explained that investment sentiment is considered robust as the global economy has relatively landed smoothly after the pandemic.

Additionally, as expectations grew that domestic interest rates would be lowered due to global disinflation, funds investing in domestic bonds saw a net inflow of 14.4 trillion won. The net asset value increased by 17.3 trillion won (13.1%) from the end of the previous year to 149.2 trillion won. Public equity and bond funds increased their net asset values by 35.4 trillion won (49.0%) and 24.7 trillion won (74.1%), respectively, compared to the end of 2020.

ETFs drove the growth. Excluding ETFs, public equity funds actually decreased by 2 trillion won (5.0%). Public bond funds showed a slight increase of 1.3 trillion won (5.0%), indicating stagnation in growth. A representative from the Korea Financial Investment Association stated, "It appears that a large amount of investment capital flowed into ETFs due to their ease of trading and low sales fees," adding, "Public funds excluding ETFs did not grow in size."

Along with this, the overseas equity craze continued, increasing the proportion of overseas stocks. At the end of 2020, domestic equity and overseas equity ETFs were 29.9 trillion won and 1.6 trillion won, respectively, with overseas equity accounting for only about 5%.

However, following the pandemic, investment demand for overseas stocks exploded, and by the end of June 2024, the net asset values of domestic equity and overseas equity ETFs reached 40.7 trillion won and 28.3 trillion won, respectively. The proportion of overseas stocks in equity ETFs expanded to about 41%.

Since the end of 2020, many investors have been actively investing, but the Korea Financial Investment Association analyzed that they have not been paying enough attention to pensions (personal pensions, retirement pensions, etc.) for retirement preparation. As of the end of 2023, 87.2% (333 trillion won) of pension funds were dormant in principal-guaranteed products such as savings and deposits.

A representative from the Korea Financial Investment Association explained, "They are still mainly managed in principal-guaranteed products such as savings and deposits," adding, "The investment scale in public equity and bond funds has not increased significantly, and trends in overseas equity and domestic bond investments have not been clearly reflected."