Money Pouring Into Open-End Mutual Funds

Investors are pouring money into open-end mutual funds, which allow them to add to or redeem their investments at any time. The funds were first allowed last month.

A total of 479.9 billion won ($371 million) in net new money flowed into open-end mutual funds from Feb. 1 through last Thursday, the Korea Investment Trust Companies Association said Sunday. By contrast, conventional mutual funds saw a net cash outflow of 2.87 trillion won from last October through January.

The money stream into the newly established funds is gaining momentum: Investors put in 131.3 billion won last month but have committed 348.6 billion won to the funds so far this month.

Bond mutual funds are particularly popular with investors, raising a total of 548 billion won since last month. Just 350 billion won flowed into stock funds.

The agency attributed the slow sale of equity mutual funds to the slack local stock market, as many investors have suffered huge losses from their stock fund investments since late last year.

Lee Chang-dong, chairman of Global Asset Investment Management Co., said that more regulatory incentives for the funds are in order. "Money is beginning to flow into open-end mutual funds," he said, "but if they are to take root in the market, there needs to be systemic support such as the allowance of privately placed funds."

Open-end funds offer easier redemption and greater transparency than other types of funds. Still, deep-pocketed investors, such as pension funds, insurers and banks, tend to shun them because they are not listed on the stock market and control a relatively small amount of assets, analysts said. "Institutional investors should look at transparency and profitability rather than the size of mutual funds," said the head of Midas Asset, Cho Jae-min.

A senior researcher at the Korea Securities Research Institute, Koh Kwang-soo, said, "Just as mutual funds have become important in the United States and Britain, more Koreans will invest in them."

by Chung Jae-hong