Credit Agricole Asset Management (CA-AM) and South Korea's National Agricultural Cooperative Federation (NACF) have signed an agreement to establish a joint investment trust management company in Seoul. The NACF is a huge institutional investor and will probably become the new JV's anchor client. Moreover it is the largest retail bank in the country, and will distribute the JV's funds to its customers throughout its 867 branches.

Under the deal, NACF will own 60% of the new company, to be named NACF-CA Investment Trust Management Company, and CA-AM will own 40%. The JV has a $25 million capitalization and is now applying for the appropriate licenses to start operations by the first quarter of 2003.

According to Lee Soo-hee, head of business development at CA-AM in Seoul, the management for the JV will be split amongst the two owners, with day-to-day operational control held by CA-AM representatives. The CEO is to be a CA-AM executive from Paris, whose identity remains confidential at this point but is apparently training for the position. CA-AM may also second someone to the CIO or COO roles, although the JV may also seek to hire outside professionals.

NACF will appoint personnel to the role of chairman and head of business development and marketing.

"CA-AM will run the company but with the approval of NACF," Lee says.

The potential benefits for the new JV are huge. NACF is a bank, rather similar to agricultural cooperatives in France, and claims one out of two South Koreans as its customers.

With $200 billion under management, it is one of the country's largest institutional investors. Most of those funds are managed in-house, although it has recently outsourced small quantities to other investment trust managers, including very small international mandates. Although these third-party relationships will continue, it is likely that NACF will begin awarding mandates to NACF-CA ITMC as well.

Lee notes the JV intends to manufacture more than just the typical bond and equity funds for NACF, but also structured products such as guaranteed funds designed to appeal to the more conservative nature of NACF and its retail network. CA-AM has a stable of guaranteed and other conservative fund products for French customers.

But the bigger prize may not be NACF itself but its retail network, which extends deep into rural Korea that is not well served by traditional fund distributors, as well as into urban areas. And while ITMCs cannot distribute directly to retail (or institutional) clients, banks can, so NACF will be in a position to sell the JV's funds to its members.

This is a new kind of ITMC on the Korean playing field, and competitors will no doubt want to keep an eye on how the JV progresses.