KB Asset Management proposes 'defense, income, growth' strategies ahead of Fed meeting

KB Asset Management has proposed an investment strategy to manage volatility in interest rates and stock markets ahead of the US Federal Reserve's Federal Open Market Committee meeting in September. Rather than trying to predict short-term market direction, the firm said investors should assign different roles to different assets based on their goals. These include managing volatility, securing income and pursuing long-term growth.

KB Asset Management said Friday that uncertainty in global financial markets has been rising. The rise is driven by US employment and inflation data, the direction of monetary policy, and variables such as international oil prices and geopolitical risks. With the direction of interest rates and stock markets difficult to predict, the firm said, investors increasingly need portfolios tailored to their goals and risk appetite. This is preferable to betting on the direction of a single asset.

In response, KB Asset Management picked seven strategy funds built around three core approaches -- managing volatility, securing income and pursuing growth. Investors can choose among them depending on their objectives and risk tolerance.

For investors seeking to manage volatility, the firm recommended the KB Naeil Dream Ultra-Short Bond Fund, KB US S&P 500 Index 40 and KB US Nasdaq 100 Index 40.

The KB Naeil Dream Ultra-Short Bond Fund invests mainly in short-maturity domestic bonds and short-term financial products, lowering sensitivity to rate swings while allowing redemptions the next business day. The KB US S&P 500 Index 40 and the KB US Nasdaq 100 Index 40 are bond-mixed products. Each allocates 40 percent to a benchmark US stock index and 60 percent to short-term domestic bonds. This lets investors tap growth opportunities in the US stock market while keeping volatility lower than a 100 percent equity investment.

For income through dividends, the firm highlighted the KB RISE US High Dividend ETF Moa Dream and the KB New High Dividend fund. Both aim to defend against downside risk and pursue stable returns even amid volatility, by generating income through dividends and investing in quality stocks.

The KB RISE US High Dividend ETF Moa Dream diversifies across US high-dividend ETFs to pursue both dividend income and medium- to long-term capital gains. The KB New High Dividend fund centers on high-dividend stocks while also including companies that have cut dividends and growth-value stocks, seeking both dividend income and share-price appreciation.

Finally, for investors seeking long-term growth, the firm proposed two asset-allocation products: the KB All Asset AI Solution EMP and the KB Dynamic Qualified Target Date Fund (TDF) 2040.

The KB All Asset AI Solution EMP uses KB's AI deep-learning algorithm, called Anderson, to adjust asset weightings -- including stock, bond and raw-material ETFs -- amid market changes. The KB Dynamic Qualified TDF 2040 adjusts its allocation to risk assets according to a life-cycle glide path, making it suitable for investors building assets over the long term.

"In a period when it is difficult to predict the direction of interest rates and stock markets, it is more important to clarify the role each asset plays within a portfolio than to guess which asset will rise," said Jang Soon-mo, head of KB Asset Management's product strategy division.

In practice, US Treasury yields have recently risen sharply, stoking volatility concerns. The yield on the 10-year US Treasury note, a key global interest-rate gauge, rose 12 basis points to 4.964 percent on Thursday (local time), the highest level since October 2023. One basis point equals 0.01 percentage point. Back then, the yield's break above 5 percent was its first in 16 years, since July 2007, just before the global financial crisis. The 10-year yield had stood around 3.3 percent in April of that year before surging past the 5 percent mark within five months.