This is the year that global fund management houses arrive en masse in South Korea. Although most of the world's big names have long sold offshore products to Korean institutions and high-net worth individuals, only two û Franklin Templeton and later Schroder Investment Management û secured wholly owned investment trust management company (ITMC) licenses, permitting them to market and sell onshore products. And in Korea, which is both wealthy and insular, onshore products are what both retail and institutional investors want.

Korea is the region's hottest market because aside from China û where doing actual business remains a concept û the field is wide open, but foreigners with the right strategy can make real money. Indeed, Franklin Templeton has raised over $2 billion in domestic assets thanks to good performance and the collapse in credibility faced by most local players since the financial crisis.

Cultural differences and the allure of Greater China have left it neglected. So too, the process of winning an ITMC license is expensive and full of red tape. But several firms spent last year patiently laying the groundwork, and are about to enter the scene.

At the head of the queue is Deutsche Asset Management, which expects to be granted the license as early as March, when its acquisition of Zurich Scudder Investments is complete. This is mainly thanks to Scudder's having a long history in Korea. In 1984 it became the first to manage a Korea fund for foreign investors, and also acquired the assets of Daewoo Capital Management in the wake of the Asian financial crisis.

Deutsche was separately investigating how it could enter the market when the acquisition was announced; those plans were dropped and Deutsche threw its weight behind Scudder's ITMC bid. Lee Won-ik, Zurich Scudder's president and CEO in Seoul, says he hopes to start business by May. It will be under the Deutsche name.

Prudential of the UK may be next in line. Prudential, which operates in the region under the name PCA, is expected to win its own ITMC license by early summer. Officials there acknowledge their application, but otherwise decline to comment.

Credit Agricole Asset Management (formerly known as Indocam) has recently opened discussions with the Agriculture Credit Cooperative û a sort of Korean version of Credit Agricole in France û to establish a joint venture ITMC, says Lee Soo-hee, Credit Agricole's Korean head of business development. He declines to provide details, but rivals note that Agriculture Credit Cooperative itself has around W50 trillion in assets, making it a sought-after institutional client.

In addition, it has a national branch network, mainly in rural areas catering to agro-business and one that far exceeds banks such as Kookmin. This is a potentially lucrative distribution network for Credit Agricole funds as well.

The Federation of Community Credit Cooperatives, another massive institution, is said to be in similar talks with another foreign fund manager.

Morgan Stanley has also just signed a memorandum of understanding with Kookmin Bank to acquire its ITMC business, says Chin Chou, executive director and head of Morgan Stanley's private equity business in Hong Kong. Kookmin merged last year with Housing & Commercial Bank, which already had an ITMC business (Jooeun ITMC, which has a joint venture with ING Barings), and the two banks decided not to have replicating business lines. Morgan Stanley is expected to restructure Kookmin ITMC and sell it. Chou says both sides are now undertaking due diligence and hope to have the deal signed by the end of March.

Rumours are also swirling that BNP Paribas Asset Management is in talks with Shinhan Bank to form a 50/50 joint venture ITMC. This is complicated by BNP Paribas' existing relationship with Dongwon ITMC, in which it has a 30% stake. It it also owns 4% of Dongwon Bank. It is unclear whether BNP Paribas would exit the Dongwon relationship, or fold it into a new JV with Shinhan. BNP Paribas officials decline to comment.

The last oft-sited name is Fidelity Investments, which has had an ITMC license application in for some time. Fidelity is said to be unwilling to go ahead, however, until it is able to operate on terms it is comfortable with, namely by introducing its open architecture trading platform. Regulators at the Financial Supervisory Service (FSS) are reportedly uncomfortable with this.

FSS officials, bred in the heat of combating chaebol inter-group corruption, fear Fidelity traders in London or New York could manipulate Korean stock prices by seeing late orders placed on the system. Fidelity has been trying to smooth feathers and explain how its internal compliance systems prohibit this sort of activity. Market players believe the FSS and Fidelity are working to a compromise, but the timing of Fidelity's market entry remains up in the air.

But Korea is not an easy place for foreigners to navigate, and several bids remain unrealized. UBS Asset Management has been in talks with Korea ITMC for nearly a year to acquire a stake. Michael Winter, executive director in Singapore, says UBS would prefer a majority stake like it enjoys in Taiwan, but that all options are on the table. He says the timetable is unknown, and rivals in Seoul believe a resolution is not at hand. Meanwhile AIG's hopes of acquiring Hyundai ITMC were shattered when the broader deal to buy Hyundai Securities collapsed.

In fact, given the allure of Korea's funds market - at W250 trillion, it is bigger than Australia's - and the dearth of foreign players, it is a testament to the difficulties of operating in Seoul that only three to five more international firms are likely to gain the coveted ITMC license this year.

In addition to Franklin Templeton and Schroders' 100%-owned ITMC businesses, today there are eight other foreign players with an onshore presence. Six involve stakes in ITMCs. Allianz Insurance has a 50% stake in HanaAllianz ITMC, Commerzbank holds 45% of KEB-Commerz ITMC, BNP Paribas Asset Management has 30% of Dongwon ITMC, ING Barings has 20% of Jooeun ITMC, Alliance Capital has 20% of Hanwha ITMC and Sumitomo holds 20% of Daishin ITMC.

There are also two foreign majority-owned asset management companies (AMCs), which are less desirable. AMCs can only offer mutual funds, while ITMCs can offer both unit trusts and mutual funds. Mutual funds must be offered as separate corporations, which have better transparency but are also taxed. SEI Investments owns 52% of SEI Asset Korea and Macquarie Bank owns 65% of Macquarie-IMM.