[THE INVESTOR] Asset management businesses in South Korea saw the biggest earnings in seven years in the second quarter, but the number of unprofitable firms also rose due to fiercer competition in the market.

According to data by the Financial Supervisory Service on Thursday, the combined net profits of asset management companies in South Korea shot up 18.8 percent to reach 160.7 billion won ($147 million) during the April-June period this year, compared to the same quarter last year.

The number of asset managers operating in the country rose to 138 during the second quarter, up from 115 in the previous quarter. There were 93 asset management firms as of the end of 2015. Ten were newly created, while 13 were turned from investment advisory firms. 
As new firms have mushroomed recently, the total number of workers in this sector climbed 7.1 percent to 5,959 on-quarter as well.

The total assets under management stood at 871 trillion won as of end-June, up 3 percent from 846 trillion won three months earlier.

The growth in net earnings came largely from increased commissions from more funds under management and the disposal of some investment-purpose real estate, the FSS said.

Their returns on equity stood at 14.6 percent in the second quarter, up 1.9 percent on-quarter.

Among the 138 asset managers, 82 were in the black during the period, while 56 others posted net losses.

These money-losing asset managers occupied as much as 40.6 percent of the entire market, signaling that competition is intensifying. In the first quarter, their market share was 37.4 percent.

“Despite the overall growth in terms of net earnings, as the number of newcomers rises, competition is getting fiercer,” said an official at the FSS. “Newly established firms are seeing deficits mostly as they have yet fragile profit models. The watchdog will enhance monitoring on those firms.”

By Song Su-hyun/The Korea Herald (song@heraldcorp.com)