Variable Insurance Funds, Increasing Overseas Investment and Rising Bond-Type Proportion

Mirae Asset Investment and Pension Center Analyzes in New Report
Returns: Stocks > Bonds, Overseas > Domestic
"Global Asset Allocation Needed"

[Asia Economy Reporter Minwoo Lee] The scale of overseas investment assets in variable insurance funds has been rapidly increasing since 2016. The proportion of bond-type funds has also increased more than fourfold over the past decade.

Mirae Asset Investment and Pension Center announced on the 12th that it has published Investment and Pension Report No. 48, titled "Analysis of Variable Insurance Fund Returns and Implications," which contains this analysis.

According to the report, an analysis of changes in the asset composition of variable insurance funds over the past 10 years (2010?2020) showed that the trend of increasing overseas investment accelerated after 2016. The scale of overseas investment assets in variable insurance funds was around 3.3 trillion KRW in 2010, but rapidly increased to 6.5 trillion KRW in 2016 and 12.8 trillion KRW as of the end of September 2020. However, the proportion remained relatively low at 12.1%.

The sector with an increased proportion was bond-type funds. As bond prices rose due to the declining interest rate trend, the proportion of bond-type funds, which was only 7.2% in 2010, increased to 29.2% in 2020.

Furthermore, an analysis of the returns of 779 variable insurance funds managed for more than five years showed that the longer the investment period, the higher the returns of stock-type funds compared to bond-type funds. The 3-year returns ranked in the order of overseas stocks, domestic bonds, overseas bonds, and domestic stocks, while the 5-year returns ranked overseas stocks, domestic stocks, overseas bonds, and domestic bonds. In particular, the investment returns of overseas stocks were significantly higher. The 5-year returns by type were 56.3% for overseas stocks, surpassing domestic stocks (23.0%), overseas bonds (18.7%), and domestic bonds (11.9%).

Meanwhile, both stock-type and bond-type funds showed higher returns and greater variance in overseas funds compared to domestic ones. Especially, the returns of overseas bond funds varied greatly depending on the fund. Therefore, it is important to increase global asset allocation and select funds with superior performance.

The Investment and Pension Report can be downloaded for free from the Mirae Asset Investment and Pension Center website. Senior researcher Nara Jung of the Mirae Asset Investment and Pension Center advised, "Over the past decade, as interest rates have declined, the proportion of bond-type assets in variable insurance has increased compared to the past. Since bond-type funds have limited growth potential going forward and overseas stocks tend to perform well in the long-term return distribution, it is necessary to actively look overseas and allocate assets globally."

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