'Various Investment Options' Securities Firms' Wrap Accounts Popular... "New Records in Accounts and Amounts"

[Asia Economy Reporter Lee Seon-ae] Investors tired of volatile markets are showing a trend toward 'indirect investment,' entrusting their investment assets rather than 'direct investment,' leading to a surge in popularity of wrap accounts (wrap account·discretionary comprehensive asset management accounts). Especially this year, a variety of products have been launched, satisfying investors' preferences.

According to the financial investment industry on the 28th, a flood of various wrap accounts have been launched by securities firms this year. Most securities companies, including Mirae Asset Securities, NH Investment & Securities, Korea Investment & Securities, and Samsung Securities, have introduced wrap account products. Investment concepts are diverse, including promising themes such as secondary batteries, healthcare domestic and international exchange-traded funds (ETFs), next-generation innovative technology company investments, and gift service combinations.

Hana Financial Investment's 'Gift Wrap' successfully attracted 100 billion KRW in funds within three months of its launch, based on the unique feature of combining the industry's first gift service. The concept is to create products that people want to gift and products they want to receive as gifts. The wrap is composed of stocks of globally excellent and sustainable companies. In particular, the core is selecting companies with high ESG (environmental, social, governance) evaluation scores among the 'World's Most Admired Companies' selected by Fortune magazine in the U.S. Samsung Securities' 'All-in-One Wrap' also gained popularity for its diverse investment destinations, attracting over 200 billion KRW in funds within five months. A Samsung Securities official stated, "The All-in-One Wrap account is attracting attention in a highly volatile market due to its advantage of freely incorporating various products and enabling customized asset management through experts."

The reason securities firms are focusing on launching various wrap accounts is that many investors are experiencing difficulties with direct investment due to increased index volatility. Accordingly, the number of wrap account subscribers and subscription amounts have steadily increased this year, reaching record highs.

According to the Korea Financial Investment Association, discretionary wrap account contract assets (evaluated value) totaled 150.9721 trillion KRW as of the end of August. This is a sharp increase of 6.7805 trillion KRW compared to the previous month. The balance exceeding 150 trillion KRW is the first since sales began in 2003. It has steadily increased from 116.7967 trillion KRW at the end of 2019 and 132.5279 trillion KRW at the end of 2020. It increased by 15 trillion KRW this year alone.

As of the end of August, the number of wrap account contracts was 2,033,562, an increase of 9,819 from the previous month. This is the first time the number of contracts has exceeded 2 million this year. The number of subscribers has also increased. The number of investors rose from 1,706,816 at the end of 2019 and 1,759,801 at the end of last year to 1,842,861 at the end of August.

A wrap account is an asset management product where a securities firm signs a discretionary investment contract with a customer and manages assets by constructing a portfolio suited to the investor's investment tendency. It is characterized by wrapping various financial products such as stocks, bonds, funds, and derivatives into a wrap. An industry official said, "Although last year was a bullish market, this year has seen a volatile market, causing difficulties for investors. Since wrap accounts allow diversified investment in various asset types including domestic and international stocks, funds, ETFs, equity-linked securities (ELS), real estate, and overseas alternative investments, their popularity is expected to continue, with assets and customers steadily increasing."

Another industry official also said, "Factors causing stock market uncertainties such as interest rate hikes and tapering (asset purchase reduction) are scattered, so the popularity of wrap account products, which can expect stable returns from a defensive perspective, will continue." He added, "The lowering of the minimum subscription amount threshold, which was previously in the hundreds of millions of KRW, to about 10 million KRW is also a factor enhancing the popularity of wrap accounts."