Fund Net Assets Approaching 800 Trillion Won in First Half... "Impact of Increased Bond-Type and MMF Balances"

[Asia Economy Reporter Minji Lee] Despite a contraction in investment sentiment toward indirect investments due to an increase in direct investment scale, the net asset size of funds in the first half of the year was analyzed to have approached 800 trillion won. The growth of bond funds and money market funds (MMFs) is considered to have influenced this trend.

According to the "2021 First Half Fund Market Trends" released by the Korea Financial Investment Association on the 14th, as of the end of June, the total net assets of all funds stood at 793.4 trillion won, with assets under management at 753.8 trillion won, marking increases of 10.2% and 8.5% respectively compared to the end of last year. Although there was a net outflow of funds from equity and derivative funds, a total of 45.7 trillion won flowed into the fund market in the first half, with notable inflows into MMFs and bond funds.

Public offering funds partially recovered their growth rate, with net assets increasing by 38.4 trillion won (14%) compared to the end of the previous year, reaching 313.1 trillion won. Private equity funds increased by only 34.8 trillion won (7.9%), totaling 477.5 trillion won. The Korea Financial Investment Association explained, "While public offering funds recovered double-digit growth rates, private equity funds, which have led the growth of the domestic fund market, continued to experience a slowdown in growth following last year."

Net assets of overseas investment funds reached 259.4 trillion won, up 22.6 trillion won (9.5%) from the end of last year. Despite a sharp slowdown in growth rates of real estate and special asset funds, which hold a large share in overseas funds, inflows into overseas equity and fund-of-funds contributed to the overall increase in net assets, showing growth compared to the end of last year in all categories except bond funds (-1%).

By type, looking at net asset changes, equity funds saw increased redemption for profit-taking amid a stock market boom, but total net assets rose by 9.4 trillion won (10.3%) to 100.1 trillion won. Among these, domestic equity funds experienced a net outflow of 2.5 trillion won in the first half, yet net assets increased by 2.8 trillion won (4.4%) compared to the end of last year, reaching 65.8 trillion won. Overseas equity funds showed an upward trend due to accelerated COVID-19 vaccination and expectations of additional stimulus measures, with net assets increasing by 6.6 trillion won (23.8%) to 343 trillion won compared to the end of last year.

Net assets of bond and mixed bond funds increased by 14.9 trillion won (12.6%) and 7.1 trillion won (44%) respectively, reaching 132.8 trillion won and 23.3 trillion won. Despite concerns over interest rate hikes within the year, domestic bond and mixed bond funds saw continued fund execution by corporations and institutions, mainly in short-term instruments, resulting in a 21.9 trillion won (17.6%) increase in net assets. Notably, mixed bond funds experienced rapid growth, with net assets rising by 6.9 trillion won (48.4%) due to a sharp inflow into public offering stock funds following large IPOs. Overseas bond funds saw a decrease of 77.8 billion won (1%) in net assets, as the U.S. Federal Reserve's tapering and earlier-than-expected interest rate hikes were anticipated.

MMFs recorded a net asset increase of 16.2 trillion won (12.8%) compared to the end of last year, totaling 142.5 trillion won, driven by increased market liquidity and inflows of standby funds. With a large influx of idle funds and government policy funds, the total net assets reached a record high of 165.9 trillion won at the end of May.

Derivative funds experienced a net outflow of 4.6 trillion won compared to the end of last year. Net assets also declined by 1 trillion won (1.4%), the only category among subtypes to show a decrease. Net assets of real estate and special asset funds increased by 7.9 trillion won (7%) and 3.8 trillion won (3.6%) respectively, reaching 121 trillion won and 110.6 trillion won. However, due to difficulties in due diligence caused by COVID-19 and the impact of private alternative investment fund insolvency incidents, the growth of overseas real estate and special asset funds slowed down.

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