Asia Pacific's family offices are a nimble bunch and never more so than when it comes to ESG where they're already proving to be ahead of the regulators.
ING IM is the second such partner for KTPF, which signed a similar MOU with Goldman Sachs Asset Management last year. The two houses reportedly competed against 14 other global providers for the role. The two MOUs were initially meant to be signed within a short period of time, but negotiations with GSAM took longer than expected. Once those terms were agreed, it formed the basis for KTPF's arrangement with ING IM.
Korean institutional investors are generally quite new to overseas investments but have been loath to pay for advice from investment consultants. They remain desperate for training and understanding how the business works. The template was set last year by the $230 billion National Pension Service (NPS), which forged strategic relationships with Credit Suisse Asset Management and Morgan Stanley Investment Management, as well as with the World Bank and large pension funds in Western countries.
People familiar with the NPS arrangement says the experience has been mixed for both sides, and remains a work in progress. Credit Suisse and Morgan Stanley may feel they deserve more assets, while in some areas, NPS is not sure it is getting the value it wants. In other areas, however, NPS officials are reportedly pleased with the exposure; the problem it faces is usually a shortage of staff, rather than a lack of openness by its partners.
The Teachers Pension Fund is much smaller and far less exposed to international markets. This suggests that, to make such intensive training worthwhile to Goldman and ING, it must promise them a much larger portion of its assets; or that the level of training will be pretty basic.
This is not yet a trend but sources report Samsung Fire & Marine, which also has only a small amount invested overseas (about $630 million), is requesting pitches along similar lines. So far no other mandates of this nature are in the market, but fund executives say it would be no surprise if a few more mid-sized institutions follow suit.
Investment consultants say they are not being left out, although they acknowledge that developing business in Korea requires patience. Watson Wyatt, for example, now has four or five people dedicated to investment consulting in Seoul among a variety of clients, for a range of services. But given the size of the Korean institutional market, this is still very small; in Hong Kong, the investment-consulting team is double the size.
Some market players say this is because most Korean investors are still more focused on "the deal" rather than on long-term strategic issues. Strategic partners such as ING IM are meant to offer not only exposure to their trading desk and portfolio-construction teams, but provide advice in areas such as asset/liability matching and strategic and tactical asset allocation.
For independent fund managers, this kind of work is not attractive, and probably not feasible; so far all the players involved are tied to investment banks or insurance companies. One local CEO of an independent firm which already manages money for the KTPF, says the Teachers Fund asked him to pitch "so we look like we're interested in helping the client", but both sides recognised this as a face-giving measure rather than a realistic bid.
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