Asset managers post best quarterly profit since 2022 on ETF boom

South Korea's asset management industry posted its strongest quarterly earnings since the fourth quarter of 2022, buoyed by rising share prices and rapid expansion of the exchange-traded fund market. However, the profit gap between firms widened, and the share of loss-making managers actually increased.

Assets under management at domestic asset managers stood at 2,355.7 trillion won as of end-March, up 166.7 trillion won, or 7.6%, from 2,189.1 trillion won at end-2025, according to preliminary first-quarter earnings data the Financial Supervisory Service released Monday.

Of that total, fund assets in custody rose 119.2 trillion won (8.7%) to 1,490.3 trillion won, while discretionary investment assets grew 47.5 trillion won (5.8%) to 865.4 trillion won.

Public fund growth was particularly striking. Public fund assets reached 705.5 trillion won, up 96.1 trillion won (15.8%) from end-2025. The FSS attributed the surge to a roughly 20% advance in the Kospi — from 4,214 at end-2025 to 5,052 at end-March — alongside rapid expansion of the ETF market.

ETF net asset value grew 21.4% to 360.7 trillion won from 297.1 trillion won at end-2025. Over the same period, equity fund assets rose 55.1 trillion won and money market fund assets increased 28.6 trillion won.

Private funds, by contrast, grew a more modest 3.0%, adding 23.1 trillion won to reach 784.9 trillion won — a notably slower pace than public funds.

Net profit for the period at asset managers totaled 1.4664 trillion won in the first quarter, up 699.5 billion won (91.2%) from 766.8 billion won the previous quarter and a 228.7% surge from 446.1 billion won in the same period last year.

Operating profit reached 1.3523 trillion won, up 54.0% quarter-on-quarter and 232.5% year-on-year. Higher fee income drove the improvement: first-quarter fee revenue rose 164.2 billion won (9.5%) from the previous quarter to 1.8931 trillion won.

Discretionary and advisory fees jumped 36.4% quarter-on-quarter to 431.6 billion won, making a significant contribution to the earnings rebound. Fund-related fees edged up 3.5% to 1.4614 trillion won. Gains from securities investment using proprietary assets rose 14.7% quarter-on-quarter to 319.6 billion won.

Operating expenses fell 13.6% quarter-on-quarter to 1.2977 trillion won, as selling and administrative costs dropped 22.1% following heavy performance bonus payouts concentrated in the fourth quarter of last year. Return on equity climbed 13.9 percentage points to 31.0%, from 17.1% the previous quarter.

Despite the industry-wide improvement, the gap between individual firms continued to widen. The total number of asset managers stood at 511 as of end-March, four more than at end-2025. Of those, 319 firms (62.4%) recorded a profit, but the share of loss-making firms rose to 37.6% from 32.3% the previous quarter.

The loss ratio among public fund managers doubled from 7.8% to 15.6%, while the figure for private fund managers rose from 36.7% to 41.5%. The FSS said the deterioration reflected weaker earnings at some alternative investment managers amid a sluggish real estate market.

The FSS plans to closely monitor asset concentration risks stemming from the recent share price rally and scrutinize the financial soundness of individual managers. The regulator will continue to watch for signs of market overheating, particularly as retail investors have been concentrating purchases in semiconductor-related stocks and single-stock leveraged ETFs.

"We will continue to improve our supervisory and regulatory regime so that the asset management industry can enhance investor benefits and sustain healthy growth," an FSS official said.