Asset Management Firms' Net Profit Plummets 72% Year-on-Year... 61.6% of Companies in Deficit

[Asia Economy Reporter Lee Jung-yoon] It has been identified that the net profit of domestic asset management companies in the second quarter of this year sharply declined by over 50% compared to the previous quarter and by more than 70% compared to the same period last year.

According to the "2022 Q2 Asset Management Company Business Performance (Preliminary)" announced by the Financial Supervisory Service on the 8th, the net profit of asset management companies in the second quarter of this year was recorded at 170.1 billion KRW, down 52.9% from the previous quarter and 72% from the same period last year.

Fee income was 1.0801 trillion KRW, increasing 9.6% from the previous quarter but decreasing 2.1% compared to the same period last year. Fund fees increased by 13.7% from the previous quarter to 900.8 billion KRW, while discretionary advisory fees decreased by 7.1% to 179.3 billion KRW. Selling and administrative expenses were 651.7 billion KRW, down 1.2% from the previous quarter but up 17.5% from the same period last year.

As of the end of June this year, the assets under management (fund trust assets and discretionary investment contracts) of asset management companies stood at 1,362.2 trillion KRW, a 0.2% decrease from 1,364.6 trillion KRW at the end of March this year.

Fund trust assets were 818.3 trillion KRW, and discretionary investment contracts were 543.9 trillion KRW, down 0.1% and 0.2%, respectively, compared to the end of March. Public offering funds were recorded at 280.8 trillion KRW, which is 18.8 trillion KRW less than at the end of March, with money market funds (MMF) and equity funds decreasing by 15.6 trillion KRW and 4.2 trillion KRW, respectively.

Private equity fund trust assets increased by 17.6 trillion KRW to 537.5 trillion KRW compared to the end of March this year. MMF increased by 8.8 trillion KRW, real estate by 4.7 trillion KRW, and special assets by 3.9 trillion KRW.

As of the end of June this year, there were a total of 380 asset management companies, including 76 public offering companies and 304 general private equity companies. This is an increase of 20 companies compared to the end of March. The total number of employees was 12,109, up 3.4% during the same period.

Among the 380 companies, 146 posted profits, while the remaining 234 recorded losses. The ratio of loss-making companies rose by 29.1 percentage points to 61.6% compared to the end of March this year. In the case of general private equity companies, 207 out of 304, or 68.1%, recorded losses, raising the ratio of loss-making companies by 31.8 percentage points.

The return on equity (ROE) of asset management companies fell by 6.8 percentage points from the previous quarter to 5.7%, and dropped by 18.3 percentage points compared to the same period last year.

A Financial Supervisory Service official explained, "During the second quarter of this year, the fund trust assets and discretionary investment contracts of asset management companies showed little change compared to the previous quarter. However, due to increased uncertainty in the financial market caused by factors such as the US interest rate hikes, the operating environment deteriorated, leading to a sharp rise in the ratio of loss-making companies and a decline in profitability indicators of asset management companies following the previous quarter."

He added, "In preparation for ongoing interest rate hikes and other domestic and international risk factors, we will check the financial and profit and loss status of vulnerable companies and continue to monitor fund inflow and outflow trends and potential risk factors."

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