Overseas Investment Funds
The Korea Composite Stock Price Index (KOSPI) has soared past 2,400 points level, reaching a new record high every day. However, the net value of South Korea's overseas investment funds has surpassed 110 trillion won (US$97.04 billion) as big investors look overseas for high returns despite the recent bull of the domestic stock market.
On the other hand, local stock funds have decreased to face less than 50 trillion won (US$44.11 billion) in the total value, not acting as a big player.
According to the data by the Korea Financial Investment Association (KOFIA) on July 16, the combined net worth of overseas investment funds, including public offering and private equity funds, came to 110.75 trillion won (US$97.71 billion) as of the 12th, up 40.38 percent from 78.9 trillion won (US$69.6 billion) a year earlier.
By asset type, special asset funds overseas had a combined 16.86 trillion won (US$14.88 billion) under their management, up a whopping 72.89 percent, or 7.11 trillion won (US$6.27 billion), from 9.75 trillion won (US$8.6 billion) a year ago. Special asset funds are the funds that are invested in special assets such as raw materials, aircrafts, ships and works of art, excluding securities and real estate.
The total net worth of real estate-focused investment funds jumped 55.9 percent, or 9.6 trillion won (US$8.47 billion), from 17.19 trillion won (US$15.16 billion) to 26.79 trillion won (US$23.63 billion) over the same period.
The net value of hybrid funds, which invest in securities, real estate and special asset freely, rose as much as 164.36 percent from 637.5 billion won (US$562.42 million) to 1.68 trillion won (US$1.49 billion).
However, the rate of increase in net securities-focused funds, which invest in conventional assets including stock and bond, remained at the 20 percent level. The combined net worth of funds investing in overseas securities, bonds, hybrid securities, hybrid bonds and re-indirect funds reached 51.76 trillion won (US$45.66 billion), up 29.92 percent from 39.84 trillion won (US$35.15 billion) a year earlier.
In addition, private equity funds, an equity investment method with fund raised by less than 49 individual investors, are generally more popular than public offering funds which are being sold by securities companies and banks. When dividing overseas investment funds into private equity and public offering funds, the net value of private equity funds accounts for 65.55 percent of the total with 72.61 trillion won (US$64.06 billion), while that of public offering funds stands at 38.08 trillion won (US$33.6 billion). The value of public offering funds increased nearly 8 trillion won (US$7.06 billion) from 30.53 trillion won (US$26.94 billion) last year, while that of private equity funds grew more than 24 trillion (US$21.17 billion) from 48.36 trillion won (US$42.67 billion).
Experts attributed the jump in the net worth of overseas investment funds to increased interest by local institutions and big-time individual investors in various overseas assets that produce relative higher returns than domestic stocks.
By contrast, the combined value of domestic stock-type funds fell to 52.99 trillion won (US$46.75 billion) from 55.94 trillion won (US$49.35 billion) a year ago, despite the record pace of the stock market.
Lee Hwan-tae, head of the asset management support division at the KOFIA, said, “As the domestic stock market has limits in terms of size, asset management companies are also turning their eyes to overseas markets investing in property and special assets which have recently become popular investments. Domestic stock-type funds fail to get out of the pattern of buy the dips and resell the highs, which were solidified in “boxPI” in the past.”