Korean public offering funds see net $1.6bn outflow amid wintry IPO market

Funds in waiting for public offerings are quickly ebbing due to sluggish sentiment towards Korean securities.

Net outflow reached 2.3 trillion won ($1.6 billion) so far this year and over 3 trillion won in a year amid chain cancellation by IPO candidates.

Investment in public offering funds, which are designed to profit from shares of companies planning to go public in addition to government bonds and investment-grade corporate debts, came to 4.2 trillion won as of Oct. 22, shrinking sharply from 6.55 trillion won recorded on Dec. 31, 2021, according to data compiled by local financial market tracker FnGuide on Monday.

Net outflow from the public offering fund market is estimated at 2.3 trillion won for this year to date, with the figure for the past 12-month period topping 3 trillion won.

The rapid outflow comes as the average return rate of public offering funds dips to negative 6.1 percent, disappointing investors who enjoyed big profits amid the stock market rally last year.

Daol KTB KOSDAQ Venture IPO Stock Focus Securities Investment Trust – Equity was among the biggest losers, with its return rate at -34 percent for a 12-month period. Samsung KOSDAQ Venture Plus Securities Investment Trust 1 - Equity Fund logged a -29.8 return rate.

The outflow, which was triggered by an overall slump in the local stock markets, was further accelerated after major IPO candidates of this year canceled their plan to go public. Hyundai Engineering withdrew its public listing plan in January, followed by Hyundai Oilbank, Lionheart Studio, and Golfzon Commerce.

Public offering fund generally attracts retail investors who have limited access to acquire initial public offering shares. Kosdaq venture funds, for example, have priority access to 30 percent of those stocks going public in the secondary Kosdaq market.

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