Although the domestic stock market is booming, asset management firms are not able to smile entirely. This is because the revenue of one in three domestic equity funds is falling short of the KOSPI index's rate of increase.
According to fund evaluation company KG Zeroin on the 20th, among 858 domestic equity funds, 76.8% (659 funds) use the KOSPI index and the KOSPI 200 index as benchmark (BM) indices. A BM index serves as a standard for comparing investment performance, and a fund's revenue must exceed the rate of increase of the BM index to be evaluated as well-managed.
The problem is that as the KOSPI and KOSPI 200 indices sharply rise, domestic equity funds fail to keep up. Of the 858 domestic equity funds, 28.6% (245 funds) reported a revenue rate over the last three months (as of the 16th) that fell short of the KOSPI index's rate of increase (30.19%). Narrowing the period to one month, the proportion of underperforming domestic equity funds compared to the KOSPI index's rate of increase reaches 44.8% (384 funds).
It is interpreted that this is influenced by the fact that even domestic equity funds often diversify their investments into other assets, including bonds, rather than investing 100% in stocks. Especially when the proportion of leading stocks that raised the stock index is small, it is inevitable that the revenue compared to the BM index is low.
For this reason, fund managers are being cautious about their clients. The longer the relative underperformance lasts, the greater the likelihood of funds fleeing. A representative from an asset management firm noted, "Clients may be patient when the overall market is poor and incurring losses, but they cannot tolerate underperformance in a bull market."
Funds that incorporate performance-based fees must be even more cautious. Performance-based fee funds have a structure where they receive a portion of the revenue that exceeds the promised rate. For instance, among performance-based fee funds, the 'VIP Korea Value Investment' fund, which has the largest set amount, can receive performance fees if its annual revenue exceeds 8%.
The performance fee for the VIP Korea Value Investment fund is up to 0.8%, and considering the calculation method, it applies when the annual revenue exceeds 16%. The fund's recent three-month revenue rate stands at 27.3%, and if the current trend continues, it can receive the maximum performance fee. The issue is that this revenue rate does not reach the KOSPI 200 index's rate of increase, which is the BM index.
Not only the VIP Korea Value Investment fund but also most performance-based fee funds are in the same situation. An employee from a securities firm's branch remarked, "There are cases where clients question whether performance fees can be taken when fund revenues are worse than the KOSPI index," adding that "it is likely that there will often be direct complaints to fund managers."
Recently popular target conversion funds are experiencing capital outflows in a short period as they achieve their target earlier than expected. Target conversion funds are products that automatically convert their portfolios from a stock focus to safe assets, including bonds, once they reach a pre-established target revenue.
Samsung Asset Management's 'Samsung Automatic Investment EMP Target Conversion Fund No. 3' reached its target revenue of 7% in less than a month after its establishment in May. While 30.6 billion won was raised at the time of recruitment, the total net worth as of the 17th has shrunk to 1.7 billion won.
In the current booming stock market, investors seem to prefer switching rather than keeping their money in funds that achieve their target revenue, leading to increased volatility in assets from the asset management firms' perspectives.
In a situation where major asset management firms are competing to lower the fees of exchange-traded funds (ETFs), smaller asset management firms are worried about the possibility of making a loss this year amidst the boom.
An official from an asset management firm stated, "In addition to ETF competition, it seems that funds generating revenue may escape as well, and many smaller asset management firms may struggle to break even (BEP) this year."
In the first quarter (January to March) of this year, which experienced a downturn in the stock market, 270 out of 497 asset management firms (54.3%) recorded losses. This is an increase of 11.6 percentage points compared to last year.