Target conversion fund popularity... Net assets increased by 265.7 billion won this year alone

Target conversion fund investment return conceptual diagram (Source: Samsung Asset Management)

As the volatility of domestic and foreign stock markets increases, funds are flocking to Target Conversion Type Funds. Target conversion type funds are structured to reduce the risk of loss by converting from high-yield assets to bond-focused safe assets once a preset yield is achieved.

According to FnGuide, the total net assets of 70 domestic target conversion type funds amounted to 1 trillion 322.5 billion won as of the 16th. This is an increase of 25.1% (265.7 billion won) from 1 trillion 58 billion won at the end of last year.

Unlike general funds, target conversion type funds do not pursue maximum profits but set a target return of 5-7% per annum. Initially, they invest heavily in high-risk assets such as stocks, but when the target returns are achieved, they are converted into bonds, which are safe assets. When the target is achieved, the fund effectively changes to a bond-type character, allowing investors to expect stable returns.

The securities industry analyzes that defensive investment demand is flocking to target conversion type funds as market uncertainty has recently risen. Since President Donald Trump's inauguration, global stock markets have shown rapid volatility. The Nasdaq index exceeded the 20,000 mark at the beginning of the year, fell to the 15,000 range, then recovered to the 19,000 mark, and the KOSPI index has also experienced significant fluctuations between 2200 and 2600.

However, target conversion type funds are not products that guarantee profits. While target returns can be set, the risk of loss due to stock price declines still exists. An official from an asset management company warned, "If the stock market falls, losses can be large, and in a rising market, profitability may be lower than general equity funds."

As demand for target conversion type funds increases, major asset management companies are launching new products. Samsung Asset Management plans to set up Samsung Global Core AI Target Conversion Type Fund No. 2 on the 30th. This fund adopts a strategy of investing 70% of its assets in artificial intelligence (AI) theme stocks and filling the rest with domestic short-term bonds. The No. 1 fund, launched last March, achieved the target return of 7% in 45 days, and the No. 2 fund raised the return target to 9%.

Additionally, KB Asset Management's KB China-US AI Tech Target Conversion Fund and Korea Investment Trust Management's Korea Investment US Split Purchase Build-Up Target Conversion Fund are also set to be released soon, expanding the target conversion type fund market.