Korea Investment & Securities Co. and Mirae Asset Securities, designated as Korea's first integrated investment account (IMA) operators, have been rolling out products one after another since the end of last year, but recent inflows have slowed somewhat. Despite a buoyant stock market at the start of the year that boosted the preference for direct investing and greater market volatility from the Middle East war, the investment appeal of the principal-paying IMA has not stood out by comparison, observers said.
According to the financial investment industry on the 18th, Korea Investment & Securities Co. launched the fourth IMA product, "Korea Investment IMA S4," with a 300 billion won cap and is taking subscriptions through the 24th. It is the same size as the third product launched in Feb., and its募集 size is about one-third of the roughly 1 trillion won set for the first and second offerings.
Mirae Asset Securities plans to issue its second IMA product within this month in a 100 billion won tranche. It had been slated for Feb., but the schedule was pushed back by a month.
An IMA pools client deposits to invest in investment banking (IB) assets and distributes revenue according to performance; it is a product with an obligation to pay principal. A set share of the funds raised must be supplied to domestic venture capital, with the ratio rising to 10% this year, 20% in 2027, and 25% in 2028. Securities firms can raise funds up to 300% of their equity capital by combining commercial paper and IMAs.
The first IMAs from Korea Investment & Securities Co. and Mirae Asset Securities, launched in Dec. last year, were a hit as investment money poured in over a short period. Korea Investment & Securities Co.'s first product hit its 1 trillion won target in four trading days and sold out early, while Mirae Asset Securities drew 475 billion won in orders for a 100 billion won offering.
But the situation changed in a month. Subscriptions for Korea Investment & Securities Co.'s second IMA in Jan. this year totaled 740 billion won, falling short of the 1 trillion won target, and the third raised only 355.3 billion won over nine trading days.
As the stock market rally continued early this year, new demand for IMAs appears to have declined contrary to expectations. Because IMAs come with principal protection and target annual returns of around 4%, typically with maturities of two to three years. Investor interest shifted to direct investing that can aim for greater returns over shorter periods.
Although the stock market's climb has slowed this month due to the fallout from the Middle East war, investor demand has not recovered much. A securities industry official said, "The IMA's strength is that it offers medium risk and medium returns, but for investors who have experienced a sharp rally, the IMA's appeal inevitably looks relatively weak."
If NH Investment & Securities is approved this month as the third IMA operator, competition will intensify into a three-way race, prompting views that the IMA market also needs to secure target returns that satisfy investor demand and differentiated underlying assets.
Securities firms have concerns of their own. A portion of the funds raised must be invested in venture capital and the like, but it is not easy to source quality mezzanine deals in a short time. The requirement to securitize from three months before maturity for principal payment stability also hampers operating efficiency.
Jeon Bae-seung, an analyst at LS Securities, said, "Securities firms licensed for IMAs will gradually expand their lineup of medium- and high-return products based on larger assets under management and track records, while increasing the share invested in risk assets," adding, "Ultimately, proving investment performance through expanded venture capital supply and capabilities in risk management will be key."