Hantoo Asset Management Releases 2025 LTCMA Report... "Optimal Asset Allocation Strategy"

Korea Investment Trust Management announced on the 3rd that it has released the ‘2025 Long-Term Capital Market Assumptions (LTCMA) Report’ through its YouTube channel and official website.

The LTCMA determines the expected returns, volatility, and correlations among over 30 asset classes necessary for constructing an optimal asset allocation portfolio. Korea Investment Trust Management has been publishing the revised LTCMA annually since 2023.

The 2025 LTCMA report was released in three versions: the currency-exposed version, the currency-hedged version, and the US Dollar (USD) version. The currency-exposed version showed the highest expected returns, followed by the USD and currency-hedged versions. The currency-exposed version has proven its value by being utilized in the design of Korea Investment Trust Management’s representative global asset allocation funds such as the ‘Korea Investment TDF Self-Directed ETF Focus Fund’ and the ‘Korea Investment MySuper Self-Directed Fund,’ which have maintained high returns for two years since their launch. The currency-hedged version is designed to select attractive assets in terms of relative value compared to Korean won bonds after hedging currency risk, while the USD version targets foreign investors.

For Korean won investors, the optimal asset allocation portfolio using the currency-exposed version was recommended. According to the 2025 LTCMA currency-exposed version, the expected returns of stocks, gold, and overseas mid- to long-term bonds increased compared to the previous year. Expected returns for domestic bonds and overseas short-term bonds declined. This was largely influenced by the price increase of risk assets and global interest rate cuts last year. Among risk assets, the asset class with the highest risk-adjusted return (Sharpe ratio) was US growth stocks, which swapped rankings with US high-yield bonds that recorded the highest risk-adjusted return last year.

The ‘Cross Matching’ strategy emphasized in the 2023 and 2024 LTCMA reports was confirmed to still be valid in 2025. The ‘Cross Matching strategy’ involves diversified investment in currency-exposed overseas stocks and domestic bonds.

The 2025 LTCMA report mentioned the increased attractiveness of US long-term bonds with currency hedging as an applied case. When investing in 10-year government bonds, there are various investment alternatives such as currency-hedged US Treasuries, currency-exposed US Treasuries, and Korean government bonds, but the analysis concluded that investing in 10-year US Treasuries after currency hedging is the most efficient. This is a noteworthy interpretation amid the recent sharp rise in interest in US long-term bond investments.

The 2025 LTCMA revision was led by Seongsu Kang, Executive Director in charge of Solutions at Korea Investment Trust Management. Executive Director Kang stated, “The 2025 LTCMA version added an LTCMA considering currency hedging costs, enabling more diverse and competitive optimal asset allocation portfolio construction than before.” He added, “This year as well, global asset allocation funds will prove their distinctiveness through outstanding performance.”