April 26, 2024

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[THE INVESTOR] The volume of private equity funds in the South Korean capital market surged about 25 percent last year, pushing up the total funds at asset management companies to a record high level, a report by the nation’s financial regulator showed.

According to the Financial Supervisory Service, the total volume of funds at 165 asset management firms amounted to 907 trillion won ($788 billion) as of the end of 2016, up 11 percent from a year earlier. It was the first time that the number exceeded the 900 trillion-won mark.

Behind the growth of the assets was an expansion of privately offered funds, which grew 24.6 percent on-year to hit 250 trillion won during the same period, the FSS said. 

In contrast, publicly offered funds inched down to 220 trillion won in 2016 from 221 trillion won a year earlier, with an increase in bonds and money market funds offset by a decrease in equity funds.

With the overall growth of the funds, net profits at the asset management companies also went up by 35 percent on-year to reach 667.4 billion won in 2016.

“Due to the continued low interest rate trends, the assets under management for privately offered funds greatly increased, leading asset management firms’ assets and net profits to mark record highs,” the FSS said in the report.

However, the FSS noted that the growth of new entries into the private equity market and more severe competition have led to an increase in loss-making private equity firms.

About 53 percent of the 91 private equity firms were in the red, with the rest in the black.

“There are also risks including additional rate hikes in the US. The competition of private equity firms against other financial industries is also expected to become fiercer,” the regulator said. 

By Kim Yoon-mi/The Korea Herald (yoonmi@heraldcorp.com)