Wrap Accounts Off To Good Start Here

Since being introduced in February, wrap accounts have been gaining popularity among wealthy investors, and the total in such accounts is approaching 3 trillion won ($2.3 billion).

A wrap account is a brokerage account in which a firm offers professional money management to advise investors in exchange for a flat fee which covers all administrative and management expenses.

At the 10 largest securities companies, more than 2.8 trillion won is invested in the wrap accounts. Accounting for more than four-fifths of that total are Samsung Securities Co. with 1.2 trillion won, Hyundai Securities Co. with 700 billion won, and LG Investment and Securities Co. with 480 billion won.

At Samsung, the ratio of individual to corporate investors is seven to three, but investments by corporate investors account for 60 percent of total deposits. The average individual investor at Samsung Securities has put 390 million won in his wrap account.

The depressed stock market compelled most investors at security companies to put about a third of their wrap account deposits in money market funds. At Samsung, individual investors on average have 29 percent of their wrap investment in money market funds, 19 percent in mutual funds, 11 percent in bonds, and 5 percent in stocks. Samsung's institutional customers have 28 percent in money market funds, 22 percent in bonds and 21 percent in stocks.

"As the stock market dived and bond markets became unstable, investors began to avoid the wrap accounts," an LG Investment and Securities official said. "But with the stock market rebounding, investors are interested again."

by Chung Jeh-won