Cosmo Asset Management, South Korea’s biggest investment manager overseeing about W3.7 trillion ($3.2 billion) in AUM, is targeting the domestic retail market, with plans to launch a mutual fund and offer products from parent Sparx Group.
On November 16 it was granted a collective investment business licence by Korea’s Financial Services Commission (FSC) that enables it to manage equity, fixed-income and money-market funds.
It broadens Cosmo’s remit from investment advisory, which had only allowed it to manage stock strategies under separately managed accounts for institutional investors, both domestic and overseas.
Cosmo chief executive Hahn Sull says the firm plans to offer a pure equity long-only strategy focused on the Korean market. “We will probably launch this in January or February next year,” he says.
For institutional investors, Cosmo plans to provide products in South Korea that are managed by Sparx, the Japan-based hedge fund firm that is one of Asia’s largest with about $6.8 billion in AUM, and which owns 70% of Cosmo.
The planned launches would diversify the product range of Cosmo, whose flagship offering is an index strategy that aims to outperform the Kospi index. Since its launch in 2004, the strategy has had annualised returns of 17.5% against the Kospi’s 11.6% and now accounts for 79% of the firm’s total AUM.
In the longer term, Cosmo hopes to gain a licence to manage onshore hedge funds. The Korean Financial Services Commission (FSC) in June outlined plans to foster a domestic hedge fund industry, with the aim of issuing its first licences by year-end.
Under FSC guidelines announced in September, asset management firms are required to have at least W10 trillion ($8.6 billion) in AUM to qualify for an onshore hedge fund management licence, which would shut out all but the biggest Asian hedge fund managers.
However, traditional fund providers Mirae Asset Financial Group, Kyobo AXA Investment Managers, Allianz Asset Management and ING Investment Management would qualify, according to South Korean media.
For licensed investment advisory firms in South Korea – which are not permitted to manufacture or issue fund products to retail investors – the AUM threshold is much lower, at W500 billion.
Cosmo’s new licence puts it into the asset manager category, making it ineligible to apply for a hedge fund licence, given the high AUM threshold.
“We’d like to participate, and certainly we have a lot of strong capabilities and experience,” says Sull. Prior to joining Cosmo last year he ran the Oojoo Absolute Return Fund, an Asian long/short equity strategy with a South Korea bias, from Singapore.
“If, at some point in time, the government makes changes in terms of [AUM] requirements, we’d like to participate,” he adds.
Market watchers expect the AUM thresholds to be lowered sometime after the issuance of the first round of licences, which are largely expected to benefit South Korean investment advisory firms and asset managers – mostly long-only – with a major presence in the country.