IPO Fund on the Rise Again

Companies Preparing Trillion-Won IPOs
421 Billion Won Fund Inflow Over One Week

[Image source=Yonhap News]

[Asia Economy Reporter Minji Lee] As trillion-won companies prepare for their initial public offerings (IPOs), public offering stock funds are once again attracting investors' attention.

According to financial information provider FnGuide on the 6th, 42.1 billion KRW flowed into public offering stock funds over the past week as of the previous day. Although 158.3 billion KRW exited over the past month and 875.1 billion KRW over three months, the trend reversed to net inflow with the start of the new year.

Among individual funds, the fund that attracted the most capital was the ‘Asset One Public Offering High Yield Fund,’ which raised a total of 21.7 billion KRW over the week. It was followed by the ‘Truston Public Offering Alpha Fund’ (15.4 billion KRW), ‘Asset One Public Offering High Yield REITs Fund’ (13.4 billion KRW), ‘VI Public Offering & Dividend 10 Fund’ (9 billion KRW), and ‘Plus Public Offering Alpha Hunter Fund’ (8.8 billion KRW).

With the IPO market expected to enjoy a record-breaking boom again this year following last year, and major companies’ listing schedules concentrated in the first half, demand for indirect investment through public offering stock funds has increased. Last year, public offering stocks recorded excess returns of 49% and 57% compared to the KOSPI and KOSDAQ indices, respectively, expanding investor sentiment. The financial investment industry forecasts the total public offering scale this year to reach a historic high of 25 trillion KRW (a 25% increase from the previous year). Early this year, listings of major companies such as LG Energy Solution (public offering scale of 12.8 trillion KRW), Hyundai Engineering (1.2 trillion KRW), CJ Olive Young, SSG.com, and Kurly are expected to proceed intensively.

The equal allocation method and the ban on multiple applications, introduced since the second half of last year, are accelerating capital inflows into public offering stock funds. Seungdoo Na, a researcher at SK Securities, said, "The shift from the existing proportional allocation method to the equal allocation method caused dilution of returns mainly among high-net-worth investors, increasing demand for public offering stock funds," adding, "The ban on multiple applications also affected the difficulty in allocating public offering stock quantities."

However, not all public offering stock funds guarantee high returns. The 144 public offering stock funds launched by domestic asset managers have various detailed investment strategies besides including public offering stocks, resulting in one-year returns ranging from 0% to 16%. For example, the highest-performing public offering stock fund was the ‘Meritz Safe Balance Fund,’ which achieved about 16% returns over one year. This fund is designed to achieve stable returns despite stock market fluctuations by investing in high-quality public offering stocks along with government bonds, monetary stabilization bonds, and bank bonds. Kwangyoung Oh, a researcher at ShinYoung Securities, said, “Public offering stock funds devise various investment strategies using lock-up commitments to secure quantities of public offering stocks. Investors must check which stocks are currently held and the detailed strategies before investing.”

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