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Mirae Asset’s Funds

Posted February. 01, 2008 08:06,   


○ Strong in Bullish Market but Weak in Bearish Market

Mirae Asset has made investors wild with enthusiasm by generating higher yields every year. But, it is now reeling from the stock market crash.

As of January 29, average yields of Mirae Asset’s stock funds (drawing more than 10 billion won) for the past three months recorded minus 24 percent for Korean stock funds and minus 22.33 percent for overseas stock funds. None of the 40 funds managed by Mirae Asset have generated any profit for the past six months. Yield on its Insight Fund has fallen below minus 20 percent since it first drew money last year.

What makes Mirae Asset seriously underperform in a bearish stock market is its aggressive investment style. Mirae Asset’s domestic stock funds’ 3-month beta coefficient is 1.34, the highest among fund management firms dealing with more than 1 trillion won of funds.

Beta coefficient measures a stock’s volatility in relation to the stock market index. If a stock’s beta coefficient is 1, it generates 10 percent of profits in the KOSPI. The fact that Mirae Asset funds’ beta coefficient is 1.34 means they generate 13.4 percent of profits when the nation’s benchmark KOSPI increases 10 percent.

Funds largely consisting of stocks with high beta coefficients perform well in a bullish market but suffer big losses in a bearish market due to high volatility.

○ Premature to Assess Mirae Asset’s Performance

Some point out that the fund operator could become a great success since it has been a big player in the market. As of the end of last year, Mirae Asset claimed 32 percent of the market with 37.56 trillion won under management.

A director at another fund management firm said, “Due to its big share, stock prices increase when Mirae Asset buys and they decrease when the firm sells. It just has the power to raise stock prices, instead of buying good stocks.”

Despite the blame for Mirae Asset’s near monopoly, there is a consensus in the securities industry that Mirae Asset’s failure means the failure of all local fund management firms. A fund manager said, “Mirae Asset has shown a good performance over a long period. It is premature to underestimate the firm for its recent bad performance in a bearish market.”

In a meeting with the Dong-A Ilbo on January 28, Gu Jae-sang, president of Mirae Asset Investments, was confident of success, saying, “We survived the IT bubble in 2000 and the terrorist attack on the U.S. on Sept. 11, 2001. Our strategies have always worked over the long term.”

He also said confidently, “If someone criticizes Mirae Asset’s recent fund yields, we have nothing to say. But, our investment which focuses on profits, growth and trends has succeeded. We will not change our perspective on the market nor our stance in investment strategies.”