Fever of Alternative Investment: Private Equity Funds Leads the Fund Market to Reach 480 Trillion Won | BusinessKorea

Saturday, September 23, 2017

Private equity fund sales recorded at 270.98 trillion won (US$239.81 billion), accounting for 56.3 percent of the total fund sales, as of the end of July.
Private equity fund sales recorded at 270.98 trillion won (US$239.81 billion), accounting for 56.3 percent of the total fund sales, as of the end of July.
SEOUL,KOREA
13 September 2017 - 12:00pm
Yoon Yung Sil

According to the Korea Financial Investment Association (KOFIA) on September 12, the combined sales of public offering funds and private equity funds amounted to 480.95 trillion won (US$425.62 billion) as of the end of July. The sales are about to reach a record high of 500 trillion won (US$442.48 billion) in two years after surpassing 400 trillion won (US$353.98 billion) in 2015. The figure has increased by 41.74 trillion won (US$36.94 billion), or 9.5 percent, this year alone.

The fund sales growth is propelled by sales of private equity funds. Private equity fund sales recorded at 270.98 trillion won (US$239.81 billion), accounting for 56.3 percent of the total fund sales. The figure has steadily been on an upward trend after exceeding public offering fund sales last year for the first time and the gap between private equity and public offering funds has widened to 61 trillion won (US$53.98 billion).

On the other hand, the sales of public offering funds formed the high of 260 trillion won (US$230.09 billion) in 2009 but the figure has been up and down around 200 trillion won (US$176.99 billion) for eight years now.

Kim Jong-min, a researcher at the Korea Capital Market Institute, said, “The public offering fund market in where the share of individual investors is relatively high is shrinking, while the private equity fund market in where the demand of super-rich and institutional investors is high is continuously growing. The fever of alternative investment, such as real estate and special asset, has led to the popularity of private equity funds.

In fact, real estate and special asset funds show the highest level of rise. The sales of real estate and special asset funds grew 56 percent and 59.4 percent, respectively, in the last two years, far exceeding the average growth rate of total funds of 18.8 percent. The sale of stock funds, which took up the most of the total sales, increased as low as 1.9 percent over the same period. A special asset refers to an asset for investment excluding stocks and real estate. Domestic asset management companies invest in various actual assets, including aircraft, new renewable energy and infrastructure.

Securities companies’ fund sales reached a record high of 341 trillion won (US$301.77 billion) with the favorable turn in private equity fund sales. The share of securities firms in the total fund sales surpassed 70 percent as of the end of April in 12 years after 71.8 percent in February 2005 and 70.9 percent as of the end of July. The share of securities firms in the total private equity fund sales shot up to 81.8 percent.

Banks’ fund sales has remained at the 80 trillion won (US$70.8 billion) to 100 trillion won (US$88.5 billion) level for seven years and the share of banks in the total fund sales dropped to 20.6 percent.

 

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