Q1 Fund: "Riding IPOs or Waiting"

by Hwang Junho

Published 20 Apr.2022 16:15(KST)

[Asia Economy Reporter Hwang Junho] In the first quarter of this year, the public offering stock funds attracted the most capital in the domestic fund market. On the other hand, bond-type funds saw capital outflows due to the impact of interest rate hikes.

According to the '2022 Q1 Fund Market Trends' announced by the Korea Financial Investment Association on the 20th, as of the end of last month, the total net assets of all funds stood at 857.4 trillion KRW, an increase of 25.5 trillion KRW (3.1%) compared to the previous quarter. Net assets reflect the market value and other factors based on the amount set. The amount set in the first quarter of this year recorded 822.3 trillion KRW, up 33.9 trillion KRW (4.3%) from the previous quarter.

During the same period, the net assets of public offering funds were 321 trillion KRW, and those of private equity funds were 536.4 trillion KRW. They increased by 8.9 trillion KRW (2.9%) and 16.5 trillion KRW (3.2%), respectively.

Net Assets of Equity and Bond Funds Both Declined

By asset type, equity funds saw capital outflows as uncertainties in the stock market increased due to complex adverse factors such as global inflation, U.S. interest rate hikes, and the Russia-Ukraine conflict. The total net assets of equity funds recorded 106.4 trillion KRW, down 4.4 trillion KRW (-4.0%) compared to the previous quarter. Of the net asset decrease, 400 million KRW was withdrawn from domestic equity funds, and 400 billion KRW from overseas equity funds.

For bond funds, net assets decreased by 1.7 trillion KRW (-1.3%) from the previous quarter to 128.1 trillion KRW. This is analyzed as capital outflows due to the bond market weakening amid a monetary tightening stance.

The association analyzed that due to the impact of interest rate hikes (bond price declines), bond funds were the only type to experience net capital outflows, with both domestic and overseas bond funds seeing net asset decreases compared to the previous quarter.

Public Offering Stock Funds Also Temporary... Let's Wait and See

The net assets of mixed bond funds temporarily increased as massive capital flowed into public offering stock funds, resulting in an overall increase in total fund net assets, but have now stabilized. In January alone, ahead of the 'LG Energy Solution' IPO, more than 2 trillion KRW flowed into mixed bond funds including public offering stock funds, boosting the total net assets of mixed bond funds to 25.5 trillion KRW. However, after LG Energy Solution's listing, the amount decreased to 24.8 trillion KRW as of the end of March.

The net assets of short-term financial funds such as money market funds (MMFs) grew significantly. From 136 trillion KRW in December last year, it increased to 174.2 trillion KRW in February, then decreased to 153.8 trillion KRW by the end of the first quarter due to capital demand. The association stated, "This is the result of short-term funds losing investment direction amid volatile markets," and added, "Among fund types, it showed the highest growth rate (13.1%) in net assets compared to the previous quarter."