Asset Management Firms' Net Profit Increased by 40% Last Year

Net Profit Increases as Fee Income Rises with Asset Growth
4 out of 10 Private Equity Firms Still Operating at a Loss

[Asia Economy Reporter Eunmo Koo] Last year, the net profit of domestic asset management companies increased by more than 40%. However, it was revealed that 4 out of 10 private equity fund management companies are still operating at a loss.

The Financial Supervisory Service announced on the 11th that the total net profit of 292 domestic asset management companies last year was provisionally estimated at 845.4 billion KRW, a 41.8% increase compared to 596.2 billion KRW in 2018.

The significant increase in net profit last year was due to improved fee income and securities investment gains. As assets under management increased, related fee income from fund management and discretionary management, which was 2.4601 trillion KRW in 2018, rose by 8.9% to 2.6801 trillion KRW last year. Additionally, the improvement in securities investment gains contributed to the increase in net profit. Securities investment gains from managing proprietary assets last year amounted to 127.4 billion KRW, an increase of 101.1 billion KRW compared to 26.3 billion KRW in 2018, which had decreased due to a downturn in the stock market.

Furthermore, non-operating income also significantly increased from a loss of 15.5 billion KRW in 2018 to a profit of 115.5 billion KRW, supported by gains from equity method evaluations, contributing to the rise in net profit. The return on equity (ROE), a profitability indicator for asset management companies, rose by 1.4 percentage points to 12.5% last year from 10.1% in 2018.

Although asset management companies generally showed improved performance last year, it was revealed that 4 out of 10 private equity fund management companies are still operating at a loss. In recent years, the rapidly increasing number of private fund managers showed an improvement in the ratio of loss-making companies compared to 2018, but the ratio of loss-making companies among private fund managers remains high compared to all asset managers. Last year, 88 out of 217 private fund managers (40.6%) recorded losses, which is higher than the overall loss-making company ratio of 34.6%. In 2018, 80 out of 169 private fund managers (47.3%) were operating at a loss.

Last year, the total assets under management of asset management companies reached 1,236.5 trillion KRW, an increase of 117.8 trillion KRW (11.6%) compared to the end of 2018, driven mainly by private equity funds and alternative funds. During the same period, fund custody assets increased by 98.6 trillion KRW (17.9%) to 649.6 trillion KRW.

Private equity funds recorded 412.4 trillion KRW, up 79.2 trillion KRW compared to the end of 2018. Special asset funds investing in ships, aircraft, oil fields, etc., increased by 22.3 trillion KRW, and real estate funds (21.9 trillion KRW) and mixed asset funds (13 trillion KRW) also expanded. Public offering funds increased by 19.4 trillion KRW to 237.2 trillion KRW compared to the end of 2018. Bond funds increased by 7.2 trillion KRW, and stock funds (4.6 trillion KRW) and money market funds (MMF) (4 trillion KRW) also saw increases in custody assets.

A Financial Supervisory Service official stated, “With the increase in new entries of private fund managers, the ratio of loss-making companies remains high, and structural changes in the fund market centered on private and alternative funds are ongoing. We plan to regularly check the financial and profit and loss status of companies with weak revenue bases, such as newly established asset managers, and strengthen monitoring of fund custody trends and potential risk factors.”

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