Recently, the public fund sector has also worked to regain its presence amid the rise of exchange-traded funds (ETFs). They are addressing the shortcomings of public funds by reducing redemption cycles and introducing new management strategies such as target conversion.
Thanks to this, the amount of funds flowing into public funds has also increased. However, the recent recovery trend in the public fund market is largely attributed to the rising domestic stock market, leading to evaluations that it is a half-hearted growth.
According to the financial investment industry on the 30th, Shinhan Asset Management recently shortened the redemption cycle of its 'Carbon Neutral Solution Fund' from the previous 8 business days to 4 business days. By changing the strategy to include only domestic stocks (T+2) and U.S. stocks (T+1), they significantly reduced the redemption cycle. IBK Asset Management even launched a fund this month characterized by a 'quick redemption cycle', allowing investors to receive their investment back after 4 business days of applying for redemption.
The industry sees public funds as undergoing a process of absorbing the advantages of ETFs, which allow real-time transactions. Unlike public funds, which fix the trading price based on the fund's standard price the day after or the day following a redemption request, ETFs are traded directly in the market. Even when redemption requests are made while revenue is generated, cases of incurring losses have been frequent. Reducing the redemption cycle has improved the weakness of public funds where uncertainty was significant due to knowing the selling price only after deciding to liquidate the fund.
Asset managers are also diversifying their management strategies. A representative example is the 'target conversion' fund, which has recently emerged as a new opportunity for asset managers. The target conversion fund automatically reduces its stock proportion and increases the bond proportion, which is a safe asset, once the target return is reached. Compared to ETFs, where investors have to check the fluctuating transaction prices and make trades themselves, this fund is evaluated as a product that maximizes the management ability of the fund.
In the case of bond-mixed types, they usually set a target return of 6-7%, making it suitable for investors seeking medium risk and medium return in a low-interest-rate environment.
According to financial information provider FnGuide, as of that day, the net worth of target conversion funds was 1.7595 trillion won, increasing by 654.2 billion won compared to the beginning of the year. The growth trend was also sharp in terms of the established amount. As of the end of the second quarter this year, the established amount became 1.6344 trillion won, nearly doubling compared to the end of the fourth quarter last year (1.1113 trillion won).
The fund that attracted the most money this year was also a target conversion product. The 'KCGI Korea Target Conversion Fund No. 2', which was募集 last month, raised a total of 276.8 billion won, setting a record for the largest established amount this year. KCGI Asset Management plans to launch target conversion fund No. 3 next month, about a month later.
In the first half of this year, the domestic stock market has shown an unprecedented upward trend, leading to a significant increase in early achievement cases. In April, the 'KCGI Korea Target Conversion Bond Mixed Fund' achieved a target return of 6% just 55 days after its launch, and in May, the 'Samsung Global Core AI Target Conversion Fund No. 1' achieved a target return of 7% in 45 days. Since the beginning of this year, Shinhan Asset Management, Korea Investment Management, and KB Asset Management have consecutively launched target conversion products.
However, there are evaluations that the recent growth of public funds is 'half-hearted', riding on the rally of the domestic stock market. An official from one asset management company noted, 'The early transitions of target conversion products are attributable to the performance of management strategies, but it can be interpreted that revenue has risen significantly due to the sharp rise in the domestic stock market in the first half of the year.'
Another official from a different asset management company said, 'The target return indicated by target conversion products is not an annual return, but ultimately a target concept within the period.' They added, 'Market conditions may make it difficult to achieve the target return within the period.'