Hedge funds utilizing an initial public offering (IPO) strategy are underperforming. While the KOSPI has risen approximately 60% since the beginning of the year, IPO hedge funds recorded a minimum return of -60% during this period. The financial investment industry had expected a rebound in IPO hedge fund returns as the popularity of newly listed stocks continued into this month.
According to hedge fund performance data from a major securities firm obtained by Money Today on the 29th, the “JC Asset IPO General Private Investment Trust No. 1” fund recorded a return of -58.76% from the beginning of the year through August. The fund’s return dropped by half, recording -53.26% in August alone. The “GVA Europe Pre-IPO General Private Investment Trust No. 1 (Professional Investors)” fund, with assets under management (AUM) reaching 43.3 billion won, followed with a return of -49.53%.
Subsequently, the “Terra IPO General Private Investment Trust No. 1” recorded -42.68% from the beginning of the year through August, the “AP IPO General Private Investment Trust No. 3” recorded -38.94%, the “I&J IPO General Private Investment Trust No. 1” recorded -36.64%, the “Eutterm IPO General Private Investment Trust No. 3” recorded -34.18%, the “Leading IPO Housing Subscription General Private Investment Trust No. 2 (Professional Investors)” recorded -33.57%, the “BNB IPO Venture R1 General Private Securities Investment Trust” recorded -33.50%, the “Fine Value Pre-IPO No. 8 General Private Securities Investment Trust (Professional)” recorded -32.89%, and the “Dain Galilei IPO General Private Investment Trust No. 1 (Professional)” recorded -31.35%, all showing losses exceeding 30%.
The returns of recently designed IPO hedge funds were also poor. Thirteen IPO hedge funds were created in July, and five in August. None of them exceeded a 1% return. Among the IPO hedge funds designed in July and August, the lowest return was recorded by the “With Plus IPO General Private Investment Trust No. 2.” This fund recorded a return of -3.35% from its inception through August.
IPO hedge funds are products that adopt volatility arising during the initial public offering process as their strategy. They generate returns by making equity investments in unlisted companies before and after an IPO, or by directly investing in newly listed stocks.
The low returns of IPO hedge funds are due to the unfavorable atmosphere in the newly listed stock market. Funds participating in an IPO receive allocation quotas proportional to their investment amounts. While there are differences depending on the lead underwriter, it is known that funds receive allocations of approximately 0.2% to 0.3% each. To secure a larger allocation quota during demand indication, funds commit to a commitment period. In this situation where fund capital is locked up, if the price of a newly listed stock plunges, investors incur valuation losses without being able to recover their investment. A financial investment industry official said, “The IPO market is so sluggish that one would estimate any IPO strategy hedge fund generating profits must be incorporating other strategies.”
However, signs of a potential turnaround have emerged as news of successful listings by KOSDAQ companies has been heard since the beginning of this month. Wise Planet Company, which listed on the KOSDAQ on the 23rd, closed trading at 22,800 won that day. This price represents a 47.37% increase compared to its offering price of 12,000 won.
Wise Planet Company even rose as high as four times its offering price (a “tadtabul”) on its first day of listing. The atmosphere differs from last month, when listed companies posted negative returns on their first day. Big Wave Robotics and Global Technology, which also listed that day, rose by 63.61% and 74.90%, respectively, during regular trading hours. Deoksan Nephcore, which supplies navigation solutions to the defense and space sectors, is scheduled to list on the 30th; Melcon, a semiconductor equipment company, is scheduled to list on the 1st of next month; and Jinkosdeck, a cosmetics manufacturer, is scheduled to list on the 2nd of next month. These companies are also drawing attention.
in STOCK
