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 late last year, but recent inflows have slowed somewhat. Analysts said that even though market volatility has increased due to the Middle East war, the investment appeal of IMAs, which are principal-payment products, has not stood out relative to the stronger preference for direct investing amid a bullish market at the start of the year.
As of the 18th, according to the financial investment industry, Korea Investment & Securities Co. launched its 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 last month, and the offering size has been reduced to one-third compared with the first and second products, which were launched at about 1 trillion won.
Mirae Asset Securities plans to issue its second IMA product this month in a 100 billion won offering. It had been slated for launch last month, but the schedule was pushed back by a month.
An IMA pools customer deposits to invest in investment banking (IB) asset and other areas and allocates revenue according to performance, with an obligation to pay principal. A set ratio 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 short-term notes and IMAs.
The first IMAs from Korea Investment & Securities Co. and Mirae Asset Securities, released 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 subscriptions for a 100 billion won offering.
But the situation changed in a month. The second IMA subscription by Korea Investment & Securities Co. in Jan. this year totaled 740 billion won, falling short of the 1 trillion won target, and the third attracted only 355.3 billion won over nine trading days.
With the stock market's strength continuing early this year, new demand for IMAs appears to have declined contrary to expectations. IMAs aim for around 4% annual revenue with principal protection and typically have a two- to three-year maturity. Investors' interest shifted to direct investing, which can offer the prospect of larger gains over a short period.
Although the stock market's rise has cooled this month due to the effects of the Middle East war, investor demand has not recovered significantly. A securities industry official said, "The strength of the IMA product is that it is medium risk and medium return, but for investors who experienced a surge market, the appeal of IMAs inevitably looks relatively weaker."
If NH Investment & Securities wins approval this month as the third IMA operator, competition will intensify as a three-way race, prompting views that the IMA market also needs to secure target returns and differentiated underlying asset that can satisfy investor demand.
Securities firms also have concerns. They must invest part of the money raised in venture capital and other areas, but it is not easy to source quality mezzanine deals in a short period. 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 into medium-return and high-return products based on the expansion of assets under management and track records, while increasing the share of investments in risky asset," adding, "Ultimately, it is important to prove investment performance through expanded venture capital supply and to demonstrate risk management capabilities."