Domestic stock funds, last year's return was 81%... Outperformed overseas funds

Last year, the domestic stock market saw a significant rise, with the returns of domestic equity funds far outperforming overseas funds. Especially, the Korea Composite Stock Price Index (KOSPI) experienced the highest increase among major overseas stock indices, injecting notable vitality into the domestic asset management market.

According to data released on January 3rd by fund evaluation agency FnGuide and the Korea Financial Investment Association, in 2025, the average return of 1,053 domestic equity funds was 81.53%. Actively managed funds achieved a return of 71.23%, while index funds tracking market benchmark indices posted a high return of 84.72%. Meanwhile, during the same period, 1,154 overseas equity funds had an average return of only 17.04%. Notably, North American equity funds recorded a return of 14.74%, significantly lower than the performance of domestic funds.

Behind this return gap was the extraordinary surge of the KOSPI index last year. The KOSPI rose 75.63% in 2025, ranking first among major global indices. The Korea KOSDAQ index, mainly composed of small and medium-sized stocks, also increased by 36.46%, maintaining a steady trend. Analysts believe that this stock market rally was driven by multiple factors, including strong performance of large domestic tech companies, optimistic 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 return situation, overseas funds attracted more investor attention in terms of capital inflows. Last year, domestic equity funds received approximately 13.272 trillion KRW in inflows, while overseas equity funds saw inflows of 15.769 trillion KRW. This reflects investors’ continued demand for diversified overseas assets and high interest in global large-cap tech stocks. In fact, statistics show that last year, domestic investors net bought about $32.46 billion (approximately 46.8 trillion KRW) of US stocks and $9.88 billion (about 14.3 trillion KRW) of US bonds.

On the other hand, with a significant improvement in investor sentiment, the balances of investor deposits and margin trading financing also increased substantially. By the end of last year, investor deposit balances rose from 54.2 trillion KRW at the end of 2024 to 87.4 trillion KRW, an increase of 33.2 trillion KRW. Margin trading financing balances also increased by 11.5 trillion KRW, reaching 27.3 trillion KRW. This indicates that individual investors actively participated in the stock market.

Despite the domestic stock market experiencing a bull run driven by improved performance and policy expectations, capital flows still show a trend toward diversified global investment. Going forward, factors such as the direction of US benchmark interest rates, volatility in tech stocks, and whether the domestic economy can recover are likely to influence asset allocation strategies. It is expected that the balance and strategic choices between high-yield domestic funds and overseas funds that continue to attract capital will be the main variables in this year’s investment market.