Integrated Investment Accounts Surge in Popularity

Integrated investment accounts (IMA) are rapidly gaining traction in South Korea. Korea Investment & Securities’ ‘Korea Investment IMA S1,’ launched on December 18th, attracted 1 trillion won in just four days. Mirae asset securities’ ‘mirae Asset IMA No. 1,’ introduced on December 22nd, also quickly sold out, raising approximately 500 billion won – five times the initial target. This popularity stems from the products’ principal guarantee and an annual rate of return of 4%, exceeding typical bank term deposit rates. Though, investors should be aware of drawbacks, including restrictions on early cancellation, relatively high fees, and potential tax implications.

Korea’s First IMA Sells Out Quickly

Unlike conventional funds, IMAs allow securities companies to invest in businesses while guaranteeing the principal. This system, recently implemented by the government, aims to support both corporate financing and protect investors. IMA products are categorized into three types: low-return stable options (1-2 year maturity, 4-4.5% annual target return), medium-return general options (2-3 year maturity, 5-6% annual target return), and high-return investment options (3-7 year maturity, 6-8% annual target return). IMAs offer performance-based dividends and do not guarantee a fixed rate of return; payouts depend on management performance and asset value at maturity.

Korea Investment IMA S1 is a closed-end fund wiht a two-year maturity and a standard annual return of 4%.The minimum subscription is 1 million won with no upper limit. Funds will be allocated to M&A acquisition financing loans, loans to small, medium, and large companies, and business progress collective investment vehicles (BDCs). The product’s total expense ratio is 0.6% annually, comparable to stock funds. Performance exceeding the 4% standard return is subject to a 40% performance fee, which is higher than the 20% typically charged by private equity funds (PEF). A Korea Investment & Securities official stated they expect to achieve an annual return of 6-7% through investments in high-quality assets leveraging their corporate finance expertise, emphasizing a low-risk, high-return profile.