South Korean investors are turning to offshore asset investment. The size of overseas investment funds fell short of 80 trillion won (US$66.06 billion) at the end of 2016 but has more than doubled in just two years to 170 trillion won (US$140.38 billion). An increasing number of investors is flocking to offshore assets amid a prolonged trade dispute between the United States and China and a bearish stock market in South Korea.
The net assets of overseas investment funds came to 169.80 trillion won (US$140.22 billion) as of Aug. 13, according to the data from the Korea Financial Investment Association (KOFIA). The figure increased by 26.5 percent from the end of December last year.
The size of net assets of offshore investment funds was only 60.68 trillion won (US$50.11 billion) at the end of 2015 but has since grown at a rapid pace, reaching 78.49 trillion won (US$64.81 billion) at the end of 2016, 113.58 trillion won (US$93.79 billion) at the end of 2017 and 134.16 trillion won (US$110.79 billion) at the end of 2018.
The trend has been driven by investments in alternative investment funds, such as real estate funds, special asset funds and derivative investment funds. Funds designed to invest in overseas properties showed the largest growth. Assets in funds investing in offshore real estate rose by more than 8 trillion won (US$6.61 billion) in just seven months from 40.21 trillion won (US$33.20 billion) at the end of January to 48.96 trillion won (US$40.43 billion) in August. The amount of special asset funds which invest in alternative investment assets, including aircraft, reached 37.78 trillion won (US$31.20 billion), while that of derivative funds stood at 16.72 trillion won (US$13.81 billion). The figure of overseas equity-type funds came to 19.50 trillion won (US$16.10 billion).
They also had a high rate of return. The rate of return on offshore equity-type funds stood at 15.73 percent this year as of Aug. 13, while those on overseas bond-type funds and overseas alternative funds reached 8.23 percent and 7.72 percent, respectively, according to Seoul-based market tracking company FnGuide. In particular, the earnings rate of leverage funds in mainland China exceeded 50 percent. Oh Gwang-young, an analyst at Shinyoung Securities Co., said, “The Chinese stock market showed an upward trend because of expectations for government policy and improvement in supply and demand, though it is the country directly involved in the trade dispute with the United States.
Offshore investments are growing in size in the form of private equity funds. Out of 169 trillion won (US$139.55 billion) of total overseas investment funds, private equity funds came to 129 trillion won (US$106.52 billion), accounting for 76 percent of the total.