Asset Management Firms Post Half in Losses Again in Q2... Net Profit Down 7.7% from Previous Quarter

Net Profit of 455 Companies 384.9 Billion KRW
Assets Under Management Increase to '1,443 Trillion KRW'

The net profit of asset management companies in the second quarter of this year decreased by 7.7% compared to the previous quarter. Although fee income turned to an increasing trend compared to the previous quarter, nearly half of the companies still failed to avoid losses, leading to an assessment that it is difficult to say that the overall profitability of the asset management industry has improved.

According to the provisional data on the business performance of asset management companies for the second quarter of 2023 released by the Financial Supervisory Service on the 7th, the net profit of asset management companies from April to June this year was 384.9 billion KRW, down 32.1 billion KRW (7.7%) from the previous quarter. Compared to the same period last year, it increased by 215.1 billion KRW (126.7%).

Total operating revenue was 1.2386 trillion KRW, with the increase in fee income (131.3 billion KRW) exceeding the decrease in securities investment gains (70.5 billion KRW), resulting in a 29.6 billion KRW (2.4%) increase compared to the previous quarter. Among these, fee income had continuously decreased from 1.0339 trillion KRW in the third quarter of last year, 944.3 billion KRW in the fourth quarter, and 891.3 billion KRW in the first quarter of this year, but recovered to 1.0226 trillion KRW in the second quarter. This was an increase of 131.3 billion KRW (14.7%) compared to the previous quarter, but a decrease of 57.9 billion KRW (5.4%) compared to the same period last year. Fund fees were 838.7 billion KRW, and discretionary advisory fees were 183.9 billion KRW, increasing by 14.2% and 17.3% respectively compared to the previous quarter.

Securities investment gains were 82.5 billion KRW, down 46.4% from the previous quarter. Compared to the negative 117.8 billion KRW recorded in the second quarter of last year, this was an increase of 200.3 billion KRW. Operating expenses increased by 2.8% compared to the previous quarter due to an increase in selling and administrative expenses.

Polarization among companies deepened. Out of 455 companies, 228 recorded profits, while 227 recorded losses. The ratio of loss-making companies was 49.9%, up 9.7 percentage points from the previous quarter. In particular, among 374 general private asset management companies, 163 were profitable and 211 were loss-making, with the ratio of loss-making companies reaching 56.4%, an increase of 11.4 percentage points compared to the previous quarter.

The return on equity (ROE) in the second quarter was 10.9%, down 0.7 percentage points from the previous quarter but up 5.2 percentage points compared to the same period last year.

As of the end of June, the total assets under management of asset management companies stood at 1,443.4 trillion KRW, an increase of 12.8 trillion KRW (0.9%) compared to the end of March. Among these, fund custody assets increased by 1.2% from the previous quarter to 881.4 trillion KRW. Public offering funds decreased by 6 trillion KRW from the previous quarter to 306.8 trillion KRW, while private funds increased by 16.7 trillion KRW to 574.6 trillion KRW (65.2%). Discretionary investment contracts amounted to 562 trillion KRW, up 0.4% from the previous quarter.

The Financial Supervisory Service stated, "The assets under management of asset management companies have maintained a slight upward trend since the first quarter, and some profitability indicators showed relatively stable performance, such as fee income, which had been continuously declining, increasing compared to the previous quarter." However, it added, "There are also indicators that worsened compared to the previous quarter, such as the increase in the ratio of loss-making companies, so it is still premature to evaluate that profitability has improved." It also added, "We will continue to monitor fund outflow trends and potential risk factors."

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