The new chief executive of Baring Asset Management Korea says the firm plans to leverage its international parent’s broader platform to bring more global product to Korean investors.
Khwarg Tae Sum, appointed CEO earlier this year following Baring’s acquisition of SEI Asset Korea, notes it has just $90 million in assets under management for global products.
“We will make an effort to increase this, which will be possible given Baring’s more diverse global product lines,” he tells AsianInvestor, adding that this will bring diversification benefits to Korean investors who are too heavily exposed to the domestic market.
He says the firm will focus on existing products as well as strengthening its offerings. On the retail side, Khwarg will introduce a comprehensive range of feeder funds to tap its offshore products. It will also introduce Baring's international products to Korean institutional clients.
"Our ultimate business goal will be to become a leading asset manager with local knowledge on a global scale," says Khwarg.
Barings finalised its acquisition of SEI Asset Korea on March 29 this year. The new entity, Baring Asset Management Korea, started officially on April 15 and now has $7.1 billion in AUM and almost 50 staff, of whom more than 20 are investment professionals.
UK-based Barings had previously entered the Korean market in 2010 with Barings Korea Ltd, which had just two staff and has now been merged into the new entity.
Once the acquisition was approved, the three funds that Barings had already brought to the market – high-yield bonds, Asean frontiers and China select – became active.
Its China select fund seeks to benefit from the country's growth by investing in Hong Kong-listed stocks as well as other China-related investments. Besides large cap, it has the flexibility to invest in small- to mid-cap growth stocks that are less well researched.
By focusing on China’s urbanisation, it returned 17.7% in absolute terms last year, against 7.29% for the Shanghai Composite Index. This fund is being sold through domestic securities companies such as Tongyang and Hyundai, although it is adding other distributors.
It is understood that further launch plans for Barings in Korea include emerging market equity and fixed income funds, specifically more China product, pending regulatory approval. Asset allocation products, including multi-asset, are also considered likely, as reported.
Barings has built its multi-asset capabilities out of the UK and developed Asia Dynamic Asset Allocation strategy (ADAA) for Asian institutions. This aims to capture risk-adjusted returns associated with diversified growth assets, with a focus on less volatile Asian equities.
ADAA is managed by Khiem Do, Barings’ head of Asian multi-asset product. He is responsible for managing Asian as well as all multi-asset portfolios for clients in Asia. He notes that Korean investors need to invest in a more diversified set of offshore asset classes to reduce volatility inherent in Korea's equity and bond markets.
He notes, too, that Korea has been impacted by a weakening yen, sparking concerns over loss of market share and the pricing power of Korean exports.
He also points out that Asian equities have underperformed leading Western markets amid China’s lack of reflationary policies in the face of a slowing domestic economy and global trade.
However, he adds: “We expect Asian markets to catch up with [Western] developed markets in coming months, as they are cheap and the worst of earnings downgrades appear to have passed.”
Khwarg had been chief executive of SEI Asset Korea since 1997 prior to the acquisition. The firm was predominantly institutional, with 15 public funds, which has since been rebranded under Barings.
About 80% of its assets were institutional, managed on a segregated basis with a mix of actively managed domestic equity and fixed income. Its clients were largely pension and insurance companies.
Previously, Ian Pascal, Baring’s London-based head of marketing and communications, has told AsianInvestor that the new entity would target both institutional and retail clients as it strives to build its brand and reputation in the country.
SEI Asset Korea was the 19th largest of 82 asset managers registered in Korea at the time of acquisition. It was founded in 1988 as Tong Yang Investment Advisory and merged with Korea Asset in 1997.
It points to a history of pioneering fund products in the country, introducing fixed-income mutual funds in the late 1990s and high-paying dividend funds in the early 2000s.