The Korea Herald


Public overseas investment funds back on track

By Bae Hyun-jung

Published : Sept. 8, 2017 - 19:03

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South Korea’s publicly offered overseas investment funds have recently reverted back to the popularity they enjoyed in the early 2000s, due to tax benefits and higher returns, data showed Friday.

According to the Korea Financial Investment Association, the total net worth of these funds stood at 39.4 trillion won ($35 billion) as of Tuesday this week. This marked the first time in six years that the figure inched up toward the 40 trillion won mark.

The figure has remained below the given mark since August 2011, when equity-linked funds drastically became unpopular among investors. The total hit a record-low in February this year, reaching a 27 trillion won range.

(123RF) (123RF)

A key reason was the mass withdrawal of global investment from emerging markets such China, India, South American and Southeast Asian states in the wake of the global financial crisis.

The recent rebound in the gain of public overseas investment funds was largely attributable to Seoul’s move to deduct tax for overseas stocks funds, as well as investors’ aspiration for higher returns amid persistent low interest rates here.

“It is the tax benefits which made investors turn to overseas equity funds once again, as a way of making profits in an age of low interest rates,” said Oh Eun-soo, analyst at KB Securities.

In February this year, financial authorities revived the tax benefits on overseas equity funds as part of their efforts to revitalize the market.

Also, the recent geopolitical turbulence in the Korean Peninsula, caused by Pyongyang’s nuclear provocations, have increasingly been luring investors toward safer alternatives outside the country.

The ratio of public funds in overseas investment funds stood at 34.1 percent, still falling far behind that of private funds, but the percentage is likely to remain in an uptrend for a while, observers noted.

Of that total, the net assets for real estate-linked funds rose to 1.5 trillion won, marking a doubling growth from 700 billion won range in January last year, according to the KFIA data.

Riding on this recovery trend, leading asset management companies launched publicly offered real estate funds during the first half of the year. A fund investing into an office building in Tokyo, operated by Korea Investment & Securities earlier this week, attracted a total investment of 143.7 billion won, according to officials.

By Bae Hyun-jung (