More investors flock to alternative funds

The size of funds that invest in real estate and nontraditional assets has topped 100 trillion won ($89 billion) as investors have poured money into alternative vehicles seeking stable returns, industry data showed Sunday.

According to data compiled by the Korea Financial Investment Association, real estate funds and special asset funds with exposure to commodities, weather, artworks and other alternative investment vehicles had 103.92 trillion won worth of assets under management as of Wednesday, up 9.5 trillion won, or 10.1 percent, from at the end of last year.

The figure compares with 68.2 trillion won worth of stock funds in total and 104 trillion won in bond funds, the data showed.

The size of alternative funds stood at some 60 trillion won in 2015 but swelled at an alarming rate last year as investors chased after stable returns amid low interest rates and a slackened local stock market.

Last week, Korea’s central bank held its key rate steady at a record-low 1.25 percent for this month, extending its wait-and-see approach for an 11th straight month as the country’s new government is pushing to expand fiscal spending to help revive Asia’s fourth-largest economy.

Last June, the Bank of Korea made a surprise rate cut, citing a need to stimulate the lackluster economy amid a prolonged economic slowdown.

The country’s benchmark stock index, the Kospi, also has been stuck in a tight range for years due to sluggish economic conditions. But entering this year, the Kospi has rallied by more than 15 percent so far this year, on the back of an improved earnings forecast.

On Friday, Korean shares extended their winning streak to end at a new record high on the back of improved investor sentiment on gains from Wall Street. The benchmark Kospi added 12.37 points, or 0.53 percent, to reach an all-time high of 2,355.30.

Yonhap