Shinhan Asset Management noted on the 17th that it published a report on the ‘2025 fund market outlook.’
This report, published for the sixth consecutive year since 2019, contains changes and forecasts of the fund market from the perspective of asset management companies that operate funds and provide products, differing from existing research materials.
The report is composed of trends in the fund market for 2024, the forecast for the fund market in 2025, and ESG investment trends.
According to the report, 2024 was a year where individual investors led the high growth of exchange-traded funds. In particular, net purchases concentrated on equity ETFs such as the Standard & Poor's (S&P) 500, Covered Call (overseas), and Nasdaq 100. Additionally, the monthly dividend ETF saw a net inflow of 6.17 trillion won this year, accounting for 36% of the overall net purchase of 17.1 trillion won.
Shinhan Asset Management identified keywords for the 2025 fund market as the United States, target date funds, monthly payment funds, and bonds. Next year is expected to mark a full entry into a policy pivot phase due to a slowdown in inflation rates. The United States is projected to maintain solid growth and favorable fundamentals.
The target date fund market saw significant capital inflow, initiated by the default option introduced in 2023, with inflows more than doubling compared to the previous year, occurring across both online and offline platforms. Shinhan Asset Management anticipates this trend will continue into next year.
The monthly dividend ETF (income strategy) is expected to remain viable even in the expected volatile environment next year. However, investors who do not need cash flow immediately may need to consider investing in total return products that automatically reinvest cash flow.
Finally, in overseas bond investment, shorter maturities are anticipated, and high-yield investments are expected to continue. It is observed that the demand for dollar-denominated short-term bonds will persist in an environment where the short-term interest rate gap between Korea and the United States is maintained, and uncertainty in the won-dollar exchange rate persists. Additionally, although the attractiveness of corporate bonds for investment has decreased due to falling yield levels, the relative attractiveness of high-yield bonds is expected to be maintained.
Additionally, regarding ESG investment, it was emphasized that “there are still very few corporations that demonstrate sincerity in increasing shareholder value according to value-up related indicators, and a high return on equity (ROE) is a prerequisite for high valuations.” As of November this year, 78% of listed companies in the securities market have a return on equity (ROE) of less than 10%.
Shinhan Asset Management’s Product Strategy Center Head Song Tae-hun said, “In 2024, direct and indirect investments by individuals increased significantly, which led to demand being created in distinctly different areas for public offering funds and exchange-traded funds (ETFs),” adding, “Retail public offering funds have seen a turnaround in net inflow of funds for the first time in five years, which can be attributed to the formation of the ultra-short-term bond market, the diversification of overseas bond strategies, and the resurgence of target date funds (TDF).”