Private Equity Funds Attracting Wealthy People
Overseas investment funds, which invest in overseas stocks, bonds and real estate, have surpassed 180 trillion won (about US$155 billion), accounting for about 30 percent of all investment funds. Private equity-type overseas investment funds mainly targeting wealthy people have grown rapidly.
The amount of established overseas investment funds at the end of last year stood at 183.70 trillion won (about US$158.3 billion), which represented 28.3 percent of the total established funds, said the Korea Financial Investment Association on Jan. 14.
By type of subscription, private equity funds amounted to 146 trillion won (about US$125.8 billion and 79.5 percent) and public offering funds 37.7 trillion won (about US$32.5 billion and 20.5 percent). The amount of private equity funds was 3.9 times higher than that of public offering funds.
The number of overseas investment funds was 4,673 at the end of 2019, 30.7 percent of the total number. It surpassed the 30 percent level for the first time. Among them, private equity funds totaled 3,314 (70.9 percent) while public offering funds 1,359 (29.1 percent).
Overseas investment funds refer to funds which that raise funds from Korean investors and invest more than 60 percent of them in overseas stocks, bonds, derivatives, real estate and special assets.
A low interest rate and a sluggish Korean stock market have been driving more and more investors towards overseas investment products.
The proportion of overseas investment funds in total funds rose from 14.2 percent in 2014 to 15.3 percent in 2015, 17.4 percent in 2016, 22.2 percent in 2017, and 24.7 percent in 2018.
Overseas investment funds have been mainly private equity funds rather than public offering funds. Private equity funds require a minimum membership amount of 100 million won (about US$86.2 million) per person.
While the amount of established overseas investment funds expanded from 53.5 trillion won (about US$46.1 billion) at the end of 2014 to 183.7 trillion won (about US$158.4 billion) at the end of last year, that of established private equity funds rose from 26.9 trillion won (about US$23.2 billion) to 146 trillion won (about US$125.9 billion) during the same period. The amount of established public offering funds inflated from 26.6 trillion won (about US$22.6 billion) to 37.7 trillion won (about US$32.5 billion) in this period.
The number of private equity funds increased by 2,226 from 1,088 at the end of 2014 to 3,314 at the end of 2019 and that of public offering funds grew by 494 to 1,359 to 865 while that of overseas investment funds increased by 2,720 from 1,953 at the end of 2014 to 4,673 at the end of last year. The number of private equity funds grew faster than that of public offering funds.
Last year, the growth of private equity funds slowed down a bit due to the DLF and Lime fiasco, but the fiasco had nearly no impact on foreign investment funds. The amount of all established private equity funds grew from 386.6 trillion won (about US$333.3 billion) at the end of July to 412.4 trillion (about US$355.5 billion) at the end of December in 2019 while that of all established overseas investment funds grew by 19 trillion won (about US$16.4 billion and 15.0 percent) from 127 trillion won (about US$109.5 billion) to 146 trillion won (about US$125.9 billion). The growth of private equity investments accounted for 73.8 percent of the growth of all private equity funds.
By investment type, among overseas investment funds, strong growth was recorded by the real estate type, the special asset type investing in real assets such as ships, aircraft, oil fields, and intellectual property rights, and the mixed asset type investing in real estate and special assets.
The amount of the real estate type rose by 47.2 trillion won (about US$40.7 billion) from 7.3 trillion won (about US$6.3 billion) at the end of 2014 to 54.5 trillion won (about US$47 billion) at the end of 2014, while that of the special asset type by 39.7 trillion won (about US$34.2 billion) from 6.2 trillion won (about US$5.3 billion) to 45.9 trillion won (about US$39.6 billion).