Stock Funds Ignored Amid Market Rally... Lowest Assets Under Management in 3 Years

Stock-type Fund Assets at 75 Trillion Won... Decreased by 10 Trillion Won Since the Beginning of the Year
Overall Fund Market Trends Upward... Real Estate Funds Show Sharp Growth

[Asia Economy Reporter Minwoo Lee] While the domestic stock market is recovering to levels seen before the full-scale spread of the novel coronavirus infection (COVID-19), equity funds are on a downward trend. Since the total fund assets under management generally show an upward trend, this is analyzed not as a decline in interest in indirect investment but as a decrease in expectations specifically for equity funds.

According to the Korea Financial Investment Association on the 4th, as of the 29th of last month, the assets under management for equity funds were recorded at 75.5126 trillion won. This is the lowest figure in two years and seven months since November 2017, when it was 73.2844 trillion won. Compared to the all-time high of 144.066 trillion won in August 2008, it is about half. Although it steadily increased from July last year and recovered to 87 trillion won by the end of the year, it has been steadily decreasing this year. Compared to 84.933 trillion won recorded in January this year, about 10 trillion won has been withdrawn. This contrasts with the KOSPI index, which recovered to the 2,190 range during intraday trading on the same day.

The trend also differed from that of the overall fund market. The total fund assets under management, which were 672.5786 trillion won in January, increased to 697.5462 trillion won last month. Although bond funds experienced some fluctuations, they generally maintained the 110 trillion won level. This is why analysts say that while the 'Donghak Ant Movement,' which saw investors jump in to buy during the COVID-19-induced market crash, increased interest in indirect investment, expectations for equity funds themselves have declined. A financial investment industry official explained, "Considering the portfolio time lag of indirect investment in equity funds, it is true that they are gradually failing to offer attractive options."

Unlike equity funds, real estate funds showed a steady increase. Last month, assets under management reached 103.6181 trillion won, increasing by about 3 trillion won this year alone. Compared to 50.9598 trillion won in May 2017, more than 50 trillion won flowed in over three years, more than doubling the amount. In particular, investment enthusiasm for overseas real estate was strong. Amid stock market instability and a continued low-interest-rate environment, and with domestic real estate regulations tightening, investors turned their attention overseas.

In May 2017, overseas real estate fund assets under management were 24.8097 trillion won, which was more than 1 trillion won less than domestic real estate fund assets of 26.1501 trillion won. However, the scale reversed within a year. In May 2018, overseas real estate fund assets reached 33.925 trillion won, while domestic real estate fund assets were 31.9438 trillion won. The gap widened over time. As of last month, overseas real estate fund assets were 56.7442 trillion won, about 10 trillion won more than domestic real estate fund assets of 46.8739 trillion won.

However, in terms of returns, equity funds have recently outperformed real estate funds. This is attributed to the KOSPI index steadily rising after falling to the 1,400 range for the first time in nine years in March. According to financial information provider FnGuide, the six-month return for equity funds with assets over 1 billion won as of the previous day was 2.82%, but the recent one-month return surged to 8.99%.

On the other hand, domestic real estate fund returns fell from 2.60% to 0.47% during the same period. Overseas real estate fund returns also dropped from 1.99% to 0.70%. In the case of overseas real estate funds, the financial authorities have taken measures as the vacancy rates of overseas real estate increased due to COVID-19, causing a decline in the underlying asset prices and potential additional losses. At the end of last month, the Financial Supervisory Service sent a letter to 20 domestic securities firms requesting a 'self-inspection related to overseas real estate investment and resale' and instructed CEOs to report the inspection results to the board of directors by the end of this month.

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