Fund to invest in stock exchanges
If a stock index performs well, just who makes money?The shareholders, right? Not so fast.
Yurie Asset Management, a Korean asset management company, says the stock market operators benefit the most from robust market conditions, and the company will introduce March 5 a fund that invests in those stock exchanges.
“It’s the gambling house, not gamblers, that turns profit when the place is packed,” said Kim Yong-tae, Yurie’s head of foreign investment team. “For us, the logic followed ― if the stock indexes are doing well, then operators of those indexes will be the major beneficiaries.”
By their nature, stock exchanges are monopolies, and with new products being traded, the exchanges are bound to grow even larger.
In addition, more exchanges are expected to be listed this year, which will expand the range of investment choices for Yurie’s fund. The Korea Exchange, the Tokyo Stock Exchange and the Bombay Stock Exchange could be listed this year, and the Shanghai Stock Exchange could follow suit next year.
Even without those newcomers, existing exchanges are turning in hefty profits. According to data compiled by Bloomberg, the New York Stock Exchange earnings per share, or the portion of a company’s profit allocated to each outstanding share of common stock, grew by nearly 188 percent year-on-year in 2006.
But what if the trading volume suffers at those exchanges? Choi Byung-ro, a senior executive at Yurie, said there will be other ways to make money.
“Our studies of global stock exchanges showed that while more than half of their commission fees come from trading, nearly one-third comes from derivative contracts and from providing information,” he said. “That means even with reduced trading, others areas make up for the loss in profits.”
Mr. Choi said Yurie’s fund will offer a diversified portfolio that invests in about 30 stock exchanges in 10 nations. “With such widespread investment, merger and acquisition deals between stock exchanges can also prove lucrative for our investors,” he said.
Yurie recently ran a mock portfolio, and it showed that from 2003 forward, its fund would have recorded twice the return of Morgan Stanley’s Capital International World Index, which invests in stock indexes in 23 nations.
By Ko Ran JoongAng Ilbo [jeeho@joongang.co.kr]
with the Korea JoongAng Daily
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