ING Investment Managers is in negotiations with Kookmin Bank to raise its stake in KB Investments, an asset management joint venture, says Garry Pieters, KB's vice president.
"It demonstrates the overall commitment of ING Group to Korea, and to Kookmin," he says. "We want to cement our relationship."
ING now owns 20% of KB Investments and wants to move that to 49%. Pieters declined to discuss valuation or other factors that will play into the negotiations.
While such a move would not have any impact on management or control issues, it would deepen ING's ability to cross-sell investment products. A recent bancassurance law will allow banks to sell insurance products, including those built around funds. The law comes into effect in August. Because there are far more insurance companies than banks, the legislation requires a bank to use products from at least three insurance companies. This means a lot of insurers will be seeking investment products they can put an insurance wrapper around - starting with Kookmin's life affiliate.
"It's all positive for fund managers," says Pieters. "We can provide the investment back end of this. Further down the road, unit-linked and savings products can follow."
Cross-selling is central to Kookmin's strategy of reaching the world's top-30 financial services companies. It is trying to reduce its dependence on credit cards, home loans or deposits, and boost its fee income via selling mutual funds and other investment products.
ING was not always affiliated with Kookmin. Its presence began as a 20% stake in a JV with Housing & Commercial Bank called Jooeun Investment Trust Management Company (Jooeun ITMC), while Kookmin Bank had its own Kookmin ITMC. Kookmin and H&CB merged in 2001.
This initially left ING with a diluted stake, but late last year, the merged Kookmin Bank sold Kookmin ITMC to Morgan Stanley, which has renamed the business Landmark ITMC. Meanwhile ING's 20% stake in Jooeun was affirmed, and in November of 2002, the JV changed its name to KB Investments. "Kookmin is very visible now, so we decided to adopt that identity," Pieters explains.
ING's role, either in Jooeun or KB Investments, has been not to lead but to provide expertise in areas such as compliance. "We've fostered a compliance culture, not just a practice of ticking off boxes," Pieters says.
The next move for the firm is to consolidate its product base. KB Investments currently has 148 funds, which is far too many. Pieters came to Seoul from Singapore less than a year ago and was surprised by the high number of funds and the constant turnover of product. "They eat funds for breakfast," he says. Ideally the firm would have 25 funds for novice investors. Over time the firm will drop its closed-end products as they mature and foster a core set of open-ended funds.