Investors turn to overseas funds amid slow growth, low interest rate

An increasing number of South Korean investors are picking foreign investment funds, seeking alternative profits amid slow growth and low interest rates here, data showed Tuesday.

The total amount invested in FIFs tallied 183.7 trillion won ($159.3 billion) as of last year, accounting for 28.3 percent of total fund deposits, according to the Korea Financial Investment Association.

Of them, private equity funds accounted for 79.5 percent with 146 trillion won, while public funds stood at 20.5 percent with 37.7 trillion won.

The number of FIF products came to 4,673, accounting for 30.7 percent of the total fund market and exceeding the 30 percent mark for the first time.

The corresponding figure has been on a steady uptrend over the years. It rose from 14.2 percent in 2014 to 15.3 percent the next year, followed by 17.4 percent in 2016, 22.2 percent in 2017 and 24.7 percent in 2018, data showed.

FIFs refer to those that invest 60 percent or more of their working capital into overseas stocks, bonds, derivatives, real estate and other special assets.

The FIFs were relatively unaffected by the derivative-linked fund fiasco which has weighed down on the domestic capital market since July.

While the total amount of PEF deposits expanded 25.8 trillion won, or 6.7 percent, from end-July to December, the corresponding amount for overseas PEFs soared 19 trillion won, or 15 percent, during the same period.

Also, while the total deposits in overseas funds rose 243.4 percent from 2014 to 2019, the overseas PEF volume surged 442.3 percent during the same period.

The heavy concentration on PEFs drew some concerns on investment polarization as they require a minimum deposit of 100 million won, effectively barring the entry of small investors.

Addressing the capital outflow caused by the overseas fund boom, financial authorities urged local financial players to further diversify their investment portfolio in order to appeal to profit-seekers.

“It is crucial to invest more in the domestic capital market for the sake of economic revitalization,” said Financial Services Commission Chairman Eun Sung-soo earlier this month in a meeting with financial company CEOs.

“I hope that (the financial industry) develops more mid-risk, mid-profit investment products that satisfy (investors’) demands amid this era of low interest rates.”

By Bae Hyun-jung (tellme@heraldcorp.com)