Children's Fund Finally Shows a Big Smile

Sharp Rebound After COVID-19 Crisis
23 Stocks Average Monthly Return 11.21%

[Asia Economy Reporter Oh Ju-yeon] Investors who opened fund accounts for their children during the sharp market downturn caused by the novel coronavirus infection (COVID-19) have smiled for the first time in a while. Although the short- and long-term returns of children's funds were consistently negative in the past, the domestic stock market has rebounded sharply after COVID-19, recording double-digit returns in the 10% range.

According to financial information company FnGuide on the 11th, the average return of 23 children's funds over the past month was 11.21%. This is due to the domestic stock market rising from the 1900 level to just below the 2200 level, maintaining a continuous upward trend.

Until now, children's funds did not show significant returns even with long-term investment due to the KOSPI being trapped in a box range. Even if one held a children's fund for 5 years, the return as of early May was -6%, resulting in a loss of principal. In particular, since the KOSPI hit the 2600 level in January 2018 and then steadily declined, the 3-year return was -9%, and the 2-year return was -17%, meaning that every time money was invested, not only was there no income beyond the principal, but even the principal itself often decreased.

As a result, the perception spread that it was better to directly buy and hold blue-chip stocks rather than choosing funds to gift to children, leading to a steady decrease in fund assets. The current assets under management of children's funds stand at 594.4 billion KRW, down 578.5 billion KRW compared to five years ago, roughly a 50% decrease. Although the assets under management are still declining, the rate of decrease has somewhat slowed. In July-August last year, assets decreased by 3.6 to 3.7 billion KRW per month, but as of June this year, the decrease was limited to 2.8 billion KRW. This change is interpreted as a result of the domestic stock market's rally after COVID-19.

Thanks to this, although children's funds have long been evaluated as 'mediocre,' their recent returns surpass many overseas equity funds. Compared to early March before the COVID-19 outbreak, the return was 5.42%, significantly ahead of overseas equity funds at 1.66%.

Overseas equity funds have attracted rapid interest over the past two years, with funds focused on Chinese and U.S. stocks drawing capital. However, as the domestic stock market moved more steeply than overseas markets after COVID-19, the average one-month return of domestic equity funds (14.89%) surpassed that of overseas equity funds (7.60%), and the returns of children's funds tracking domestic stocks also rose by more than 11% in the past month. This level is even higher than the one-month average returns of IT funds (10.95%) and 4th Industrial Revolution funds (7.77%), which have been spotlighted this year as promising sectors. KOSDAQ venture funds (9.94%) and healthcare funds (9.73%) also did not reach the returns of children's funds.

This content was produced with the assistance of AI translation services.