The firm has joint ventures in Taiwan with Changhwa Bank and in Korea with Housing & Commercial Bank (now merging with Kookmin Bank), as well as with OUB in Singapore. Although it stands alone in some markets such as the Philippines, it is comfortable working with local partners. In Japan it has a JV with another foreigner, Principal Insurance, to cover the local defined contribution market.
ING Investment Management has investment capabilities in Hong Kong for insurance products and in Singapore for retail and institutional mutual fund and discretionary business. Those offices were established in 1996 and 1997, respectively (Singapore operations were acquired from Bank Brussels Lambert).
In general the firm seeks to build its business around bank distribution, which it sees as the most conducive to long-term asset gathering as markets mature. In that regard, Singapore, Taiwan and Korea are model markets for ING, where its anchor distributors are its domestic bank partners. Chuak Chan, regional business development director, notes that even in a relatively developed market such as Singapore, the sales pitch remains focused on new funds. ING is involved in a sustained education effort among both investors and bank salespeople to subdue the IPO mentality, he says.
Asset-gathering has skyrocketed in Korea, where the JV with H&CB was launched in early 2000. Since then ING Investment Management has raised $9 billion, or 7% of the mutual funds market, Ryan claims. The World Cup Fund, launched at the start of summer, has alone drawn $300 million from investors.
The trick to this market is understanding what investors want, he says, noting that almost 90% of the assets under management are in fixed-income products. It is also important that distributors understand these products; whereas a global equities product, for example, is going to be alien. He believes that a product like the World Cup Fund, which invests in local consumer companies with strong brand names sponsoring the football is something that locals will intuitively grasp.
This is an approach the firm wants to bring to China. "We have established a model now," Ryan says. "We want a long-term partnership with a domestic fund manager. Some foreigners seem to make partnerships to learn something and move on, but we think a joint venture is the right way to do business there and we want something lasting." He believes a technical agreement could be signed with a domestic fund manager within the next few months.
Hong Kong is an exception, with ING Investment Management working on its own. ING Groep acquired Aetna's Asian operations early this year and have subsumed Aetna's Mandatory Provident Fund business into the ING name. ING now administers MPF business for third parties, and would like to begin offering its investment management capabilities to third-party MPF providers as well. But Ryan believes this is a medium-term goal, as MPF assets need time to gain critical mass. For now, the initial product line-ups will remain stable, he predicts.
He also sees opportunities in Hong Kong for ING Investment Management to start offering more sophisticated products and, again as MPF grows, financial planning services. This will become more important as MPF members begin to retire and receive lump sum payments. Ryan believes at present most people will simply put that in the bank, which is not ideal for many people. He thinks financial planning will be in increasing demand.
As for finding a local partner, particularly a local bank, in Hong Kong, Ryan remains open. ING Investment Management is now in the process of registering its mutual funds with Hong Kong authorities and may seek a bank to distribute them. But the market here is more mature than in other regional markets.
Local banks such as HSBC and Hang Seng Bank have their own investment management capabilities. Standard Chartered was also the first to start distributing mutual funds in 1994 and has a fully developed product shelf. Nor are local banks in such need to learn from a foreign partner. So while ING will continue to look for partners, it will be ready to stand alone on its insurance sales force.