Last year, despite the assets under management, the performance of domestic asset management companies deteriorated significantly due to declines in fee income and investment gains and losses, resulting in operating profits being "cut in half." The deficit ratio exceeded 50%, with one out of every two companies recording losses, and three out of ten companies fell into a state of capital erosion. Although net profit reached an all-time high, this was due to a one-time event involving Korea Investment Value Asset Management's disposal of its stake in KakaoBank; excluding this, net profit actually declined compared to the previous year.
According to the Financial Supervisory Service on the 30th, the assets under management of 433 asset management companies at the end of last year amounted to KRW 1,397.9 trillion, an increase of KRW 75.7 trillion (5.7%) compared to the end of the previous year. Fund custody balances were KRW 831.1 trillion, and discretionary investment contract balances were KRW 566.8 trillion, increasing by 5.8% and 5.6%, respectively, compared to the previous year-end.
Among the fund custody balances, public funds amounted to KRW 275.5 trillion, a decrease of KRW 9.6 trillion compared to the previous year-end. Private funds increased by KRW 55 trillion to KRW 555.6 trillion. In particular, money market funds (MMFs) surged by 75.1%, and real estate (14.4%) and special assets (13.6%) also saw significant growth.
Despite the increase in assets under management, performance worsened. Among all 433 companies, 217 recorded losses, accounting for more than half, with the deficit ratio increasing sharply by 39.2 percentage points compared to the previous year. Especially, among 352 general private asset management companies, 57.1% recorded losses. The ratio of companies with capital erosion rose to 30.0%, up 13 percentage points from the previous year.
Last year, the net profit of all asset management companies was KRW 2.8513 trillion, an increase of KRW 687 billion (31.7%) compared to the previous year; however, excluding the gain from Korea Investment Value's disposal of its KakaoBank stake, net profit was only KRW 579.4 billion. This effectively represents a roughly 73% decrease in net profit compared to the previous year.
Operating revenue was KRW 4.7999 trillion, down 14.0% from the previous year. This was due to a 9.1% decrease in fee income and a 46.2% decline in securities investment gains and losses. In particular, fund fees among fee income decreased by 10.0% to KRW 3.3092 trillion, and discretionary advisory fees fell by 4.6%.
Operating expenses increased by 15.5% to KRW 3.6149 trillion compared to the previous year. Selling and administrative expenses rose by 8.6% due to an increase of 1,656 employees. Securities investment gains and losses recorded KRW 13 billion, a 98.1% decrease. Losses surged by 101.8%, from KRW 242.5 billion to KRW 489.4 billion. Operating profit was KRW 1.185 trillion, down 51.7% from the previous year, while the return on equity (ROE), a profitability indicator, rose by 1.9 percentage points to 22.1% due to non-operating income and losses.
As of the end of last year, the number of asset management companies increased by 85 compared to the previous year-end. Public asset management companies increased by 5 to 81, and general private asset management companies rose by 80 to 352.
The Financial Supervisory Service evaluated, "Although the assets under management of asset management companies increased, the profit and loss status, including fee income such as performance fees and securities investment gains and losses, deteriorated significantly due to increased uncertainty in the financial market caused by interest rate hikes." It added, "The ratio of loss-making companies, especially among general private asset management companies, has risen sharply, and the ratio of companies with capital erosion has also increased significantly. We will continue to monitor the financial and profit and loss status of each asset management company, as well as trends in fund inflows and outflows and potential risk factors."
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