Timefolio Asset Management, regarded as a domestic "hedge fund powerhouse," sent investors an apology letter citing weak returns. Although the market has been strong recently, with the KOSPI topping 4,200 to hit a record high, Timefolio Asset Management kept its "short" strategy (betting on declines) to hedge against a market drop. On top of that, among the sectors it bought on expectations of gains, most stocks other than semiconductors underperformed.
According to the financial investment industry on the 13th, Timefolio Asset Management recently sent long-short (a strategy that simultaneously invests in price rises and declines) hedge fund clients a kind of "apology letter" containing an explanation for the weak returns and plans for how it will respond going forward.
Timefolio Asset Management cited as reasons for the underperformance that it did not change its short strategy in preparation for an index decline, while the market surged in the opposite direction. It also said that among the stocks it bought expecting gains, most, except for the semiconductor sector, did not rise as much as anticipated.
Timefolio Asset Management explained, "Net exposure was only 20%–25%, making it difficult to generate meaningful performance." Net exposure refers to the net investment ratio, which is the amount bet on rises minus the amount bet on declines out of total capital. Put simply, the long-short strategy run by Timefolio Asset Management's hedge fund misfired on both sides.
In fact, as of the 11th of this month, the three- and six-month returns for Timefolio With Time Fund (A-e class), a fund that indirectly invests by bundling Timefolio Asset Management's hedge funds, were 8.75% and 16.39%, about one-third of the KOSPI's gains over the same periods of 27.02% and 58.05%.
However, Timefolio Asset Management does not plan to change its existing long-short positions. In a note sent to investors, it said, "In the current environment, we will avoid further concentrating on specific sectors or increasing the 'long' (betting on rises) weight to chase the index higher, and instead focus on selecting the candidates for next year's leading sectors."
The company said that for the roughly two months left this year, it will keep semiconductors, artificial intelligence (AI) infrastructure, shipbuilding, defense, and the Morgan Stanley Capital International (MSCI) regular rebalancing issue on its watch list of stocks and themes. It also emphasized plans to actively trade stocks related to energy storage systems (ESS), the third amendment to the Commercial Act, and the separate taxation of dividend income, where short-term flows could concentrate.
In practice, as the domestic stock market has rallied sharply centered on a few blue chips such as Samsung Electronics and SK hynix, most active funds in the market have failed to keep up with benchmark returns.
According to fund evaluator FnGuide, the returns of 540 domestic equity active funds came to 65.70% through the 11th this year. Over the same period, the KOSPI rose 71.14% and the KOSPI 200 climbed 82.94%.
A fund manager at an asset management company said, "Passive funds mostly rose in line with the market, so there was no problem, but in the case of active funds, the share prices of food, retail, and construction stocks did not rise as much as expected, so performance was weak."
Timefolio Asset Management told investors, "Although 2025 was somewhat disappointing, we will wrap it up as well as possible and in 2026, no matter what kind of market comes, we will repay our clients' trust with steady upward progress."