Consumers misled by fund names

With interest rates so low, consumers are more interested than ever in investment funds, however, the names of those funds are often too difficult or vague for consumers to understand.

According to a survey by the Korea Consumer Agency of 500 consumers who have purchased securities funds in the last two years, only 9.6 percent, or 48 people, exactly understood the meaning of the fund names.

Only 29 percent, or 145 of those surveyed, said they knew the primary investment targets of the funds, 24 percent could identify the risks and 22 percent knew the commission rate.

Accordingly, the KCA has requested the financial authorities to mandate financial companies to include main investment targets and related risks in the fund names, ahead of the opening of an online fund supermarket slated for January next year.

Although the Korea Financial Investment Association (Kofia) currently bans investment companies from displaying different product information in names or using a modifier that could lead to misunderstandings under the voluntary guideline “Sales and Business Regulation for Financial Investment Companies,” most fund titles do not conform to that standard.

In addition, neither the Capital Market Act nor the Financial Supervisory Service’s “Practical Guide to Fund Labeling” specify the criteria for listing important information such as the areas of investment and risks.

The KCA cited such names as “Creating Billions of Money Fund,” “Saving for You” and “Real Quant Long Short” as examples of unclear or unnecessarily difficult names.

Total sales of domestic funds reached 181.36 trillion won ($169.0 billion) as of the end of June this year, with 15.21 million subscribers as of the end of March this year.

BY KIM JUNG-YOON [kjy@joongang.co.kr]