KOFIA: "3Q, Sharp Rise in Interest for Bond Funds and Short-Term Money ETFs Amid High Interest Rates"
Despite sluggish domestic and international stock markets in the high-interest-rate environment, investor interest appeared to focus on bond investments.
According to the "2023 Q3 Fund Market Trends" released by the Korea Financial Investment Association on the 16th, the total net assets of all funds as of the end of Q3 reached 942.2 trillion KRW, marking a steady growth with an increase of 18.1 trillion KRW, or 2%, compared to the previous quarter. Compared to the end of last year, this represents a 10.5% increase, or 89.9 trillion KRW. The total fund subscriptions amounted to 906 trillion KRW, up 21.3 trillion KRW from the previous quarter.
Except for the mixed bond-type funds, which continued to decline, most fund categories saw net capital inflows. In particular, bond-type and derivative-type funds recorded significant increases, with net inflows of 21.5 trillion KRW in the overall fund market. Public offering funds experienced a total net inflow of 9.7 trillion KRW during the quarter. Exchange-traded funds (ETFs) saw net inflows of 10.5 trillion KRW, while general public offering funds had a net outflow of 800 billion KRW. Private equity funds recorded net inflows of 11.7 trillion KRW.
Equity funds had net inflows of 1.5 trillion KRW. However, assets under management (AUM) decreased by 1.9 trillion KRW, or 1.8%, from the previous quarter to 103.8 trillion KRW. Bond funds saw net inflows of 7 trillion KRW, with AUM rising by 7.7 trillion KRW, or 6.2%, from the previous quarter to 132 trillion KRW. Derivative funds had net inflows of 5.2 trillion KRW, and AUM increased by 6.8% from the previous quarter to 58.5 trillion KRW. This is interpreted as increased demand mainly for ETFs linked to short-term interest rates.
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A representative from the Korea Financial Investment Association analyzed, "As the high-interest-rate trend is expected to continue for some time, demand for synthetic ETFs tracking certificates of deposit (CD) rates and similar instruments has increased."
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