Stock Market Plunge Wipes 88 Trillion Won Off Fund Net Assets in Q3, First Decline in Four Years

The sharp increase in volatility in domestic and overseas stock markets has caused the net assets of South Korea's fund market, which had continued to grow, to decline for the first time in about four years. The drop was driven by large valuation losses, particularly in equity funds, as the KOSPI plunged nearly 20% in a single quarter.

According to the "2026 Third-Quarter Fund Market Trends" report released by the Korea Financial Investment Association on October 30, total net assets across all funds, including publicly offered and private funds, stood at 1,646.7 trillion won as of the end of September, down 87.8 trillion won, or 5.1%, from 1,734.5 trillion won at the end of the previous quarter. This was the first quarter-on-quarter decline in total fund net assets in about four years, since the second quarter of 2022.

Despite net inflows, the decline in equity fund net assets amid increased stock market volatility drove the overall decrease in net assets. In the third quarter, all fund types recorded net inflows, totaling 46.9 trillion won. By type, inflows were concentrated in equity funds, at 17.1 trillion won, and derivative funds, at 7.2 trillion won. Publicly offered funds recorded net inflows of 39.5 trillion won, while private funds saw inflows of 7.5 trillion won.

However, the decline in the value of held assets due to falling stock prices far outweighed the effect of fund inflows. The KOSPI fell 19.3%, from 8,476.5 at the end of June to 6,838.0 at the end of September, reducing equity fund net assets by 58.2 trillion won, or 13.0%, and leading the overall decline. Derivative funds followed, with net assets down 24.2 trillion won, and mixed-asset funds, down 5.7 trillion won.

By contrast, as investors moved money into liquid, short-term holdings amid volatile markets, money market funds (MMFs) gained 7.6 trillion won in net assets. Bond funds, up 700 billion won, and real estate funds, up 600 billion won, also posted modest increases.

Net assets declined for both publicly offered and private funds. As of the end of September, net assets of publicly offered funds stood at 830.4 trillion won, down 67 trillion won, or 7.5%, from the previous quarter. Private funds recorded 816.3 trillion won, a decrease of 20.8 trillion won, or 2.5%. Publicly offered funds remained larger than private funds, but their share of total net assets fell by 1.3 percentage points, from 51.7% to 50.4%.

The contraction in the exchange-traded fund (ETF) market, which had been driving growth in publicly offered funds, was particularly pronounced. At the end of September, total ETF net assets stood at 457.7 trillion won, down 54.7 trillion won, or 10.7%, from 512.4 trillion won in the previous quarter. Equity ETFs accounted for 63.2% of all ETFs, leaving the market particularly exposed to the stock market decline. As a result, ETFs' share of publicly offered fund net assets also fell from 57.1% in the previous quarter to 55.1%. Net assets of conventional publicly offered funds, excluding ETFs, totaled 372.6 trillion won, a relatively modest quarter-on-quarter decrease of 3.2%, or 12.3 trillion won.

By investment region, valuation declines were recorded in both domestic and overseas funds. As of the end of September, net assets of funds invested domestically stood at 1,079.1 trillion won, down 58.3 trillion won, or 5.1%, from the previous quarter. The decline was driven by domestic equity fund net assets, which fell 16.6%, or 47.1 trillion won, from 282.9 trillion won to 235.9 trillion won.

Overseas investment funds also recorded a 29.5 trillion won, or 4.9%, decline in net assets, to 567.6 trillion won, mainly due to declines in equity funds, down 11.1 trillion won, and fund-of-funds, down 7.1 trillion won. Domestic and overseas investments accounted for 65.5% and 34.5% of total fund assets, respectively, broadly unchanged from the previous quarter.

This content was produced with the assistance of AI translation services.