Asset managers‘ operating profit falls 14.8% in Q1

South Korean asset management firms saw their combined operating profit fall 14.8 percent in the first quarter on decreased commission fee income, data showed Wednesday.

The combined operating profits of 175 local fund management firms came to 142.8 billion won ($127.2 million) by the end of March, down 24.9 billion won from the last quarter of 2016, according to data compiled by the Financial Supervisory Service.

The number of management firms suffering deficits also rose to 73, from 67 in the previous quarter.

The regulator cited the exodus of 4.9 trillion won in equity securities, in contrast to a surge into money market funds of 12.3 trillion won. This resulted in a 9.1 percent reduction in commission income, the FSS said in a release Wednesday. 

Equity funds give their investment managers higher commission fees than those of money market funds. The average commission rate of equity funds stood at 0.54 percent, about eightfold that of money market funds at 0.07 percent, as of March,

The FSS also cited the 10 new firms’ entrance into the market over the past quarter as the reason for drop in operating profit.

The combined net profit of the companies, however, rose by 62.9 percent on-quarter to 112.1 billion won, leading to an increase in return on equity to 8.9 percent as of March, from 5.6 percent as of December.

The increase was mainly because of the rise in income from equity method by 18.2 billion won and cost savings by 25.9 billion won thanks to a drop in non-operating expenses.

The sum of assets under management also increased by 2.2 percent on-quarter to some 927 trillion won. Capital from investors inched up by 0.9 percent to 440 trillion won over the first quarter by March. Capital belonging to public fund management firms rose by 4 percent to 260 trillion won, while those of private equity fund soared 3.18 percent to 227 trillion won.

By Son Ji-hyoung (consnow@heraldcorp.com)