Last year, the domestic stock market experienced a significant surge, with domestic equity funds outperforming overseas funds. In particular, the Korea Composite Stock Price Index (KOSPI) saw the highest increase among major overseas stock indices, injecting significant vitality into the domestic asset management market.
According to data released on January 3 by fund rating agency FnGuide and the Korea Financial Investment Association, the average return of 1,053 domestic equity funds in 2025 was 81.53%. Actively managed funds achieved a return of 71.23%, while index funds tracking market benchmark indices achieved a high return of 84.72%. In contrast, the average return of 1,154 overseas equity funds during the same period was only 17.04%. North American equity funds, in particular, recorded a return of 14.74%, significantly lower than the performance of domestic funds.
Behind this yield gap is the unusually large surge in the KOSPI index last year. The KOSPI rose 75.63% throughout 2025, leading all major global indices in terms of growth. The South Korean KOSDAQ, primarily composed of small and mid-cap stocks, also rose 36.46%, maintaining a steady trend. Analysts believe that this stock market rally is the result of a combination of factors, including strong performance from large domestic technology companies, positive growth expectations for the artificial intelligence (AI) industry, progress in US-China trade negotiations, and the new government's pro-market policies.
However, unlike the returns, overseas funds received more attention in terms of investor inflows. Last year, domestic equity funds saw inflows of approximately 13.272 trillion won, while overseas equity funds saw inflows of 15.769 trillion won. This reflects investors' continued demand for diversified overseas investments and their continued focus on large-cap global technology stocks. In fact, statistics show that last year, domestic investors made net purchases of approximately US$32.46 billion (approximately 46.8 trillion won) in US stocks and US$9.88 billion (approximately 14.3 trillion won) in US bonds.
On the other hand, with a significant improvement in investment sentiment, investor deposits and margin financing balances also increased substantially. As of the end of last year, investor deposits rose from 54.2 trillion won at the end of 2024 to 87.4 trillion won, an increase of 33.2 trillion won. Margin financing balances also increased by 11.5 trillion won, reaching 27.3 trillion won. This indicates that individual investors have also actively participated in the stock market.
Despite the bull market in the domestic stock market fueled by improved performance and policy expectations, capital flows still show a trend towards global diversification and balance. Looking ahead, factors such as the direction of US benchmark interest rates, the volatility of technology stocks, and the sustainability of the domestic economic recovery are likely to influence asset allocation strategies. It is anticipated that the balance and strategic choices between high-yield domestic funds and continuously attracting overseas funds will be a major variable in the investment market this year.
