South Korea's rapidly ageing population means new challenges and opportunities for asset managers. Tae Yong Lee of Mirae Asset tells Stefanie Eschenbacher
that offering innovative, value-added products is key.
Mirae means “the future” in Korean.Perhaps the single most important factor for the future of South Korean asset management is the country’s need to take care of its elderly citizens.
Diversification, including into higher-yielding products, could make up for some of the deficiencies in its private and state pension system.
Tae Yong Lee, president of Seoul-headquartered Mirae Asset, says the ageing population, as well as increased sophistication of private and state pension systems, will create the need for new products.
“This, with the increasing focus on cost and transparency could lead to a swing towards vehicle-agnostic products,” he says.
With $54 billion of assets under management, it is the leading asset manager in South Korea. Established in 1997, amid the turmoil of the Asian financial crisis, it has grown significantly since.
Lee says offering innovative and value-added products is his priority. And that through diversification and globalisation Mirae Asset strives to become one of the premier asset managers globally.
In March, Mirae Asset Global Investments merged with Mirae Asset Maps Global Investments, its sister company specialising in alternative investments.
Lee says the aim was to not only offer traditional equity and fixed income products but also alternative investments.
“Our core capability as an asset manager derives from our investment process, which strictly adheres to our investment principles and philosophy,” he says. “Our roots are firmly embedded in the dynamic and strategically important markets in which we invest.”
Experts on the ground communicate with strategically located investment professionals across the globe while a global investment committee aims to ensure the investment team complies with the investment principles and philosophy.
Mirae Asset recently launched a joint venture asset management company with two Chinese counterparts – Mirae Asset Huachen Fund Management. Mirae Asset owns 25%, Huachen Trust 10% and Tiantu Capital 35%.
“The fact that China is one of the global leading economies, alongside the United States, and the immense potential the market itself has is one of the main reasons for establishing a joint venture in China,” Lee says.
“By closely working together, we plan to provide equity and fixed income funds for retail and institutional investors.”
Other plans involve providing services for inbound investments to China by Korean and overseas clients. Lee says the aim is also to contribute to the advancement of the Chinese asset management industry through investor education and investment management training.
Elsewhere in Asia, Mirae Asset signed a conditional shares purchase agreement to acquire a 70% stake in NISP Asset Management in Indonesia.
The stated objective is to launch and manage various onshore fund products in Indonesia, but the team is also contemplating various strategies in Korea, such as showcasing Indonesian fixed income funds.
Lee says there are plans to strengthen its presence and capability in Asia both organically and through strategic partnerships. “Mirae Asset will explore a full range of opportunity in traditional funds, exchange-traded funds (ETFs) real estate and private equity across the region,” he adds.
With last year’s acquisition of Horizons ETFs Canada and BetaShares Australia, the company now operates ETF businesses across four countries – South Korea, Hong Kong, Canada and Australia.
“Through the synergies created between the expanded ETF business capacity and the Mirae Asset global network, we will definitely benefit from continued growth in the global ETF markets,” he adds.
Mirae Asset offers more than 140 ETFs, covering both passive and active strategies, totalling over $5.7 billion of assets. Lee says there are plans to further develop the ETF business globally with an innovative and investor-friendly approach.
“Our strength in Asia will help us expand and grow our already developing businesses in the United States, Europe and Latin America,” he says.
Its product line-up is built around three core strategies: emerging markets and Asian equities, global fixed income, and ETFs. Its flagship products are the Emerging Markets and Asia Great Consumer funds, the Global Dynamic Bond fund, and the enhanced income ETFs, which utilse a covered call strategy.
In the past year, some key launches have been the expansion of its Sicav platform and in the US market. In addition, it launched an emerging markets local currency bond fund in South Korea, with plans to distribute it across Europe and Asia. More recently, it introduced covered call ETFs in South Korea and launched a high interest cash ETF in Australia.
One unique characteristic of the South Korean asset management market is its concentration. Lee says the top ten asset managers, measured by assets under management, have over half of the market share of the mutual fund market.
Most of the companies among the top ten are an affiliate of a conglomerate or commercial banking group.
Mirae Asset, on the other hand, is an independent asset manager with no such affiliations.
“We way we manage our assets in Korea is no different from the way we manage assets overseas: all Mirae Asset investment teams adhere to the same investment principles and philosophy, no matter where they are located,” he says.
“However, given the different level of brand awareness and local market environments we may slightly alter our marketing strategy.”
Lee says Mirae Asset in South Korea is known for its local and overseas investment capabilities, often sought out for mandates by major institutions, including large pension funds.
“Elsewhere in the world, as our name Mirae Asset is rather new, we try to focus on increasing our brand awareness through highlighting our emerging market expertise and Asian heritage,” Lee says.
While the investment objectives for the funds remain the same, sometimes adjustments need to be made for overseas markets. This is especially the case when it comes to currency or local regulation.
Lee says the Global Dynamic Bond strategy, for example, has US, Luxembourg and Taiwan.
The funds are managed by the same investment team and follow the same core investment strategy, but they differ from each other because of local currency and regulations.
A Korea treasury bond denominated in Korean won is considered a safe asset for South Korean investors, Lee says, adding that for investors in the US or Taiwan the risk profile of the same investment will be viewed differently.
When asked about less successful products, Lee says Mirae Asset invests with a long-term view in companies, selected through bottom-up research, and puts less focus on short-term market volatility.
As it was the case elsewhere in the world, the South Korean market has suffered from short-term volatility throughout the financial crisis.
Lee was appointed head of the global business unit last year.
©2012 funds global asia