Analysis on Equity Funds in Korea: Strategic Behavior of Asset Management Companies and Investor Protection

Recently, the amount of funds through collective investment schemes has been increasing exponentially. The rising trend is expected to continue throughout 2010 when the following occurs: 1) the taking effect of tax deduction on long-term equity investment funds which was adopted in October 2008, and allows tax deduction on 3-year or longer investment; 2) the implementation of the Capital Market and Financial Investment Business Act, and 3) the onset of the mandatory retirement allowance scheme being applied to workplaces with less than five employees.

Since the asset management market has a typical structure of producing agency problems due to its separation of ownership (investor) from control (asset management company), it is necessary to effectively control those problems in order to protect investors during the expansion process of the indirect investment market as mentioned above. In particular,considering Korea’s current conditions in which many asset management companies have subsidiary relationship with vendors and that a multiple number of funds are managed by the same company, it is very significant to grasp the consequences of agency costs of equity funds and the strategic behaviors of management companies as well as to streamline institutional mechanism for the investor protection.

This study uses Korea’s equity fund-related data ranging from 2002 to 2008 to grasp the current status. It then aims to examine the relationship between the fund size and its performance based on individual fund data and analyze the existence of cross-subsidization among funds managed by the same management company.

This study has two particular features. First, unlike preceding studies on funds in Korea, which used data covering a relatively short period of time as 2 to 5 years, this study attempts to analyze data of 7 years ranging from 2002 to 2008. Second, this study analyzes the relationship between fund size and its performance, taking into account the characteristics of fund and its management company. Overseas leading studies have attempted this type of analysis, but most of Korean studies have focused on the analysis of fund performance outcome and its persistence. Given that feature of close relationship between management company and vendor and the existence of a fund family are common, it is necessary to consider characteristics of fund and its management companies when analyzing equity funds of Korea.

The analysis of current status suggests that the market concentration is increasing consistently in Korea’s management market for equity funds. Consequently, as of the end of 2008, the concentrated market structure is confirmed to exist, calling for close monitoring on conditions hindering market competition. The empirical analysis shows that equity funds do not underperform as compared to benchmarks and that persistence of their performance is found to be insignificant. The analysis which uses characteristics of individual funds confirms the existence of diseconomies of scale for large-sized funds, indicating that the expansion of fund size might be related to the inefficiency of organizations. Furthermore, according to the examination of the existence of cross-subsidization between high-fee funds and low-fee funds, a transfer of performance outcome is confirmed to move from low-fee funds to high-fee funds, meaning that management companies tend to maximize their own interest than investors’return. It is also found that such a tendency has been strengthened since 2006. These results imply that in order to protect investors, it is necessary to conduct close monitoring on transactions that might undermine the benefits of investors and comprehensive evaluation on the capability of management companies.

제1장 서 론

제2장 우리나라의 간접투자기구 현황
　제1절 주식형 펀드 시장 추이
　제2절 시장구조와 경쟁
　　1. 판매채널
　　2. 시장구조 및 경쟁도
　제3절 투자자 보호제도

제3장 분석자료 및 실증분석
　제1절 분석자료
　　1. 펀드 자료
　　2. 수익률 및 기타 자료
　제2절 기초자료 분석
　　1. 평균 펀드 성과
　　2. 개별 펀드의 초과수익률 및 성과지속성
　제3절 주식형 펀드의 대리인 비용: 규모의 경제와 교차보조
　　1. 펀드 규모와 성과 및 대리인 비용
　　2. 펀드 보수와 교차보조

제4장 분석의 종합 및 결론

참고문헌

부록