Korean Equity Funds Suffer Setbacks, Outflows Accelerate... 190 Billion KRW Withdrawn in a Day

Largest Daily Net Outflow Since February 2018
Year-to-Date Return -12.47%...Significantly Underperforming Bond and Alternative Investment Funds

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[Asia Economy Reporter Minwoo Lee] Approximately 190 billion KRW was withdrawn in a single day from the domestic equity fund market. While returns have been sluggish, the direct investment craze by individual investors, known as the 'Donghak Ant Movement,' has intensified, and investors' interest appears to have shifted to other products such as bond funds.

According to the Korea Financial Investment Association on the 13th, as of the 8th, 189.2 billion KRW was net withdrawn from the domestic equity fund market excluding exchange-traded funds (ETFs). This is the largest single-day net outflow since 208.4 billion KRW was withdrawn on February 8, 2018. The net outflow trend has continued since last year. Except for May and August on a monthly basis, every month last year recorded net outflows. Even this year, only March saw a net inflow of 191.1 billion KRW, while January recorded a net outflow of 568.9 billion KRW, February 22.5 billion KRW, and March 24.3 billion KRW.

The total assets under management also decreased. According to financial information provider FnGuide, domestic equity fund assets under management have decreased by 3.8525 trillion KRW since the beginning of this year. Compared to a 2.9128 trillion KRW decrease in domestic bond fund assets during the same period, this is about 1 trillion KRW more.

This is believed to be because individual investors are increasingly engaging in direct investment as equity fund returns remain poor. The average return of 958 domestic equity funds with assets over 1 billion KRW since the beginning of the year is -12.47%. This is significantly below the domestic bond funds’ return of 0.96%. It is also about twice as low as the returns of domestic alternative investment funds such as real estate (-6.46%) and overseas equity funds (-6.10%). Alongside this, individual investors have net purchased 27.2069 trillion KRW in the KOSPI market alone from the beginning of this year through the 12th.

Experts diagnose that the atmosphere of not considering equity funds as an investment vehicle is spreading. Kim Young-ik, adjunct professor at Sogang University Graduate School of Economics, explained, "The domestic equity fund returns are so poor that equity funds subscribed to in May 2011 still show negative returns. Amid this, the recent direct investment craze, known as the Donghak Ant Movement, has intensified, so investors cannot help but become disenchanted with funds."

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