Korea's Cosmo tipped to receive broader AM licence

Jan 5, 2011

Cosmo IM is expected to receive a licence to manage equity, fixed-income and money-market funds. Rumours also persist that it is poised to become majority owned by Lotte Group.

Cosmo Investment Management is being tipped to receive a broader asset management licence from Korea’s Financial Supervisory Service (FSS) this month.

The firm has an investment advisory licence at present, allowing it to manage only stock funds. However, AsianInvestor understands that Cosmo is poised to receive a securities-specialised licence which would enable it to manage equity, fixed-income and money-market funds.

While this falls short of a fully fledged asset management licence – which sources indicate is not easily obtained and would include all funds, including commodities and alternatives – Cosmo has the opportunity to expand its offering in future.

But even with an expanded remit, it is understood that Cosmo will continue to focus on equity fund management as its core line of business, at least initially.

Over the past few years, most asset management applications to the FSS have been for securities-specialised licences. These are seen as a step towards receiving a full licence, enabling a firm to build up a track record and therefore present a more compelling application to the regulator.

However, sources say there are no examples yet of firms having gone through this process to be awarded a full asset management licence.

The securities-specialised licence application process typically takes three months, suggesting that Cosmo applied in around October last year. If successful, it will allow the firm to raise capital from both public and private sources.

Rumours persist that Cosmo is set to become a majority-owned subsidiary of Korean chaebol Lotte Group, which acquired a 29.9% stake in the firm in 2008 from Japanese private equity firm Sparx Group (with an option to increase that to 51%).

Sparx bought Cosmo Asset Management in February 2005 and retains a 70.1% stake in the firm, but only last November Lotte Group announced it would not exercise its right to increase its stake to 51%.

However, a local source notes that Lotte is eager to expand its reach into the domestic securities and asset management industry. The group has already entered fire and casualty insurance, credit cards, and capital lending.

Cosmo was founded in 1999. Since then it has grown to become one of the largest investment management firms in Korea with close to $2.6 billion in assets under management.

This equates to a 24% share of the domestic market which at present comprises more than 130 companies with total assets of over $12 billion.

According to the Korea Financial Investment Association (Kofia), steady growth in the country’s stock market has resulted in an average of five to 10 securities-specialised applications a year from companies looking to establish themselves as asset management organisations.