Hankyoreh material photo. Reporter Baek So-ah
The financial authorities have come up with a plan to revitalize public offering funds that have contracted investment due to a decline in returns. The Financial Services Commission announced on the 31st that it had discussed the details of a plan to enhance the competitiveness of public offering funds at the Financial Development Council’s Capital Division held on the 29th. The foundation is to increase the investment attractiveness of the public offering fund by launching a variety of public offering fund products and increasing the number of channels to help select investors. The Financial Services Commission said, “The public offering fund is a traditional asset management method of the general public that allows small investment and is suitable for the pursuit of medium-risk and medium-return, but the public offering of individual investors due to insufficient performance of the public offering fund management, sales channels centered on banks and securities companies, and lack of product diversity. The preference for the fund has greatly declined,” he explained. “It is necessary to support the stable wealth growth of the people through a public offering fund that is managed by experts and has the advantage of diversified investment.” The proportion of private investors’ balances in public offering funds is continuously decreasing from 51.0% in 2015 to 47.6% in 2019 and 41.5% in 2020. First, the Financial Services Commission decided to introduce a’performance-linked management fee’ type that links the fund performance made by the manager for a certain period to the manager’s compensation for the next period in order to increase the return on the public offering fund. If the fund management performance is good, a certain portion of the management performance rate is added to the basic remuneration rate, otherwise the management loss rate is added. It is similar to a’performance-paid fund’ that does not receive additional compensation if it fails to perform, but it is suitable for long-term investors as the manager’s basic compensation is as high as that of a general fund, and the performance of a certain period is linked to the next period. In addition, funds with little investor participation will be allowed to change their investment strategy only by the resolution of the manager’s board of directors. For example, a fund that has been set up for more than 10 years and has an average daily deposit of less than KRW 5 billion for the past three years is allowed to change its investment strategy if the investor’s dissent is below a certain level. The Financial Services Commission also decided to increase the types of public offering funds in order to broaden consumer options. In addition to the existing KRW denominated money market fund (MMF), a foreign currency denominated money market fund is introduced, and a “period refund type fund” is created that periodically returns investments within a certain percentage limit of the fund’s assets upon request by investors. ETF products are expected to ease the asset composition requirements (10 or more types of bonds and bonds, respectively → 10 or more types of assets, regardless of asset type), and launch new bond-type products with maturities. The existing bond-type ETF had no maturity. In addition, we are considering introducing a fund that can change investment targets during operation. In the early stage of fund establishment, bonds are managed, but when the fund size increases, it is converted to a social overhead capital (SOC) investment fund. It also activates online sales channels for public offering funds. Investors can make simple online transactions related to public offering funds such as opening an account and searching investment information through the’integrated online advisory platform’ built by Koscom. When the online advisory platform is activated, the financial authorities expect that investment advisors will be able to consult on products of various securities companies, freeing from the practice of consulting mainly on products of two or three securities companies contracted. In the future, investors of public offering funds will be able to check the fund performance, such as the average rate of return for each vendor, at the Financial Investment Association. In the case of funds invested in other funds, the final underlying asset information is changed so that investors can find it in the prospectus and asset management report. Open funds, which are obligated to return their investments to investors at any time, must perform a liquidity stress test at least once a year and provide investor information regarding liquidity risk. The financial authorities announced that the revisions to the law will be announced by April, and that the revisions will be completed by the third quarter for matters requiring revision of sub-regulations such as the enforcement decree. In addition, we plan to come up with a plan within two quarters of the matters that the industry decided to pursue autonomously. By Shin Da-eun, staff reporter [email protected]