[Market Insight] "Promising AI Software in Naenyeon"

Korea Investment Trust Management Seo Yong-tae, Head of Global Strategy Operations
Early Achievement of 20% Target Return for Profit-Differentiated Public Fund No. 1
"AI and Autonomous Driving Themes Are Directly Linked to the Future Growth Engines of the U.S."

"The second Trump administration is expected to lead regulatory reform and economic stimulus through Elon Musk, CEO of Tesla, heading the Department of Government Efficiency (DOGE). Various industries such as housing and infrastructure, energy production and supply, investment banking (IB) and fintech, artificial intelligence (AI), and autonomous driving are anticipated to benefit."

Seo Yong-tae, head of Global Strategy Management at Korea Investment Trust Management, which operates the 'Korea Investment Global New Growth Fund' that recently succeeded in early redemption, presented these investment ideas in an interview with Asia Economy for next year. He noted, "The global stock market will continue its upward trend led by the U.S. next year," adding, "Key economic indicators such as employment and industrial activity in the U.S. are better than expected." He continued, "Considering the regulatory reforms and economic stimulus policies of the second Trump administration, economic expansion is possible," and analyzed, "U.S. companies will maintain a virtuous cycle of investment → innovation → market dominance by leveraging superior technology to increase profitability and conduct more research and development (R&D) investments."

Seo emphasized, "The AI and autonomous driving themes are directly linked to the future growth engines of the U.S.," and expressed expectations that "long-term growth potential will be high as the U.S. government is expected to provide continuous support to secure a competitive edge over China."

He particularly forecasted rapid growth in the AI software service industry. AI-driving software consists of algorithms, models, and cloud services. He explained, "Under the Biden administration, AI software companies were constrained due to concerns about AI risks and personal information," but "with regulatory easing under the second Trump administration, investments in AI software companies are expected to increase."

He stressed, "Most companies are focusing on reducing labor costs and improving productivity, making AI adoption an essential factor," and added, "Direct changes such as reducing the number of developers while using AI software are already being observed." He further predicted, "Conversational AI services like ChatGPT are only at the beginning stage," and "the spread will continue alongside the entry of related companies into the on-device market."

The 'Korea Investment Global New Growth Fund' managed by Seo is the first profit-differentiated public offering fund launched in August last year. Investing in overseas stocks across seven new growth themes?artificial intelligence (AI), semiconductors, electric vehicles, biotechnology, luxury goods, space economy, and cloud?it achieved its target return of 20% within 1 year and 3 months since launch. Although it is a 3-year maturity product, it was redeemed early after reaching the target return.

Korea Investment Financial Group has been launching profit-differentiated funds since August last year to revitalize the public offering fund market. Profit-differentiated funds divide equity participation into Type 1 and Type 2. Type 1 is for general individual investors, and Type 2 is for asset management companies or affiliates. If losses occur in the fund, Type 2 beneficiaries cover them first to partially protect individual investors from losses. This product carries lower risk of return decline compared to general public offering funds. Interest in profit-differentiated funds has grown as they have succeeded in achieving high short-term returns and early redemption while reducing risk.

Seo explained, "When selecting sub-themes for profit-differentiated funds, there is a process to review whether the industry is suitable for investment in advance and to define the management procedures and the authority of the fund manager before fund establishment," adding, "Since sub-funds invest in a concentrated number of stocks, fund managers tend to conduct more active stock research compared to general funds."

Regarding the sluggish public offering fund market, he said, "Investors judged that public offering funds were less attractive compared to other investment products," and added, "Profit-differentiated and target conversion funds were launched as asset management companies sought competitive products and received positive responses." He expressed hope, "If asset management companies appropriately provide differentiated funds from other investment products and respond flexibly to market changes, the public offering fund market will revive."

Korea Investment Trust Management plans to launch attractive investment products such as profit-differentiated funds for investors next year as well.