ING in ôexclusiveö talks to acquire Korea fund house Landmark

Morgan StanleyÆs private equity group is selling out of its investment in the Korean fund management company.
ING Investment Management is in ôexclusiveö discussions with the shareholders of Landmark Asset Management in South Korea to acquire a majority stake in the company, says Chris Ryan, Hong Kong-based Asia-Pacific CEO at ING-IM.

Landmark is 87.6% owned by Morgan StanleyÆs private equity arm, which is now a unit of Morgan Stanley Investment Management (MSIM). LandmarkÆs CEO, Choi Hong, also holds a stake that is wrapped within that figure. Kyobo Life holds another 11.2% but is not directly involved in these discussions. Choi did not return calls by press time.

Prudential Financial and Axa Investment Managers had also looked at the deal. Officials at those companies declined to comment or did not return calls, but sources familiar with the situation say these bids were never serious because the talks with ING had already been at an advanced state. Prudential, which acquired the funds business of Hyundai Securities, is currently the ninth largest fund house in Korea, while Axa does not have an onshore presence.

Ryan was not at liberty to reveal potential terms of the deal, which he hopes will be completed in the next month or so. He did confirm, however, that if ING succeeds in winning the business, it will be enfolded into its newly established wholly-owned Korea funds business. ING also owns a 20% stake in KB Asset Management. But that, as Ryan explains, is ôa small stake in a big businessö, and ING, while happy to retain that, would prefer to have a big stake in a big business of its own.

Ryan likens this deal to the firmÆs acquisition last year of ABN Amro Asset ManagementÆs onshore business in Taiwan. ABN Amro had built up a high-quality local business, mainly in fixed income, thanks to its previous acquisition of Kwang Hua Fund Management. ABN Amro wanted to sell that and concentrate on providing high-margin offshore funds to the Taiwan market, while ING wanted to achieve scale in a very competitive onshore space.

In Korea, Landmark offers ING a different set of distribution partners, investment products with a good track record, and expertise in both local and international won-denominated investments.

Landmark is the fourteenth largest fund house in Korea, according to data from the Asset Management Association of Korea. It has W5,250 billion ($5.7 billion) of assets under management. ING Asset Management in Korea, having just opened doors, has negligible third-party assets under management, according to Amak, but is also managing assets for ING Life InsuranceÆs Korean business. Ryan says that the acquisition would put the firm into KoreaÆs top-10 fund managers.

For Morgan Stanley, this is unrelated to the corporate strategy of MSIM. But demand for fund assets in Korea is hot: JPMorgan is the latest to win a new license onshore, while Goldman Sachs Asset Management has just acquired Macquarie-IMM and UBS Global Asset Management has taken a 51% stake in Daehan Investment Trust.

All of this activity is based on projections of steady but rapid growth in the funds business, particularly as pension reform works its way through the corporate sector. So for a private-equity firm, now seems like a good time to cash in on an investment. Chin Chou, who heads MSIMÆs private-equity unit for Asia out of Hong Kong, did not return calls seeking comment.
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