Consultancy Mercer has moved to offer investment management and advisory services to a broader range of sponsors and fiduciary clients in Korea after receiving the requisite licences.
The firm was awarded discretionary asset management and investment advisory permits last week. It established an advisory business in Seoul in 2009, but until now had been limited to professional investors.
Mercer is a business-to-business provider of advice, tools and fund management implementation. Its investment management business specialises in building portfolios using a multi-manager approach, drawing on global research to diversify across managers.
“The decision was made to have on-the-ground support for our investment advisory business in Korea,” notes Stephen Roberts, the firm’s Asia-Pacific head of investment management and the man tasked with building Mercer’s IM capabilities across Asia.
“We were very encouraged by the market’s acceptance of us on the ground, so as a result we have added an investment management capability as well.”
Mercer moved to licence itself as an investment adviser and investment manager last year, and Roberts confirms it has been a long process.
“We were very cognisant of regulatory issues and potential impediments and we wanted to have the right business structure. Now this moves us to a new phase of our positioning inside Korea.
“Institutionally there is no one we can’t go and talk to. We can offer our investment advice and investment management capabilities to a broader range of clients.”
Mercer’s IM business in Seoul is headed by Kwang Lee, who joined early this year, while its investment consulting business in Korea is led by Joe Kim, who transferred in 2009 from the west coast of America, where he was working as a Mercer associate.
Lee has 16 years’ asset management experience including product development and fund management to both institutional and retail investors in Korea. He has worked at Vanguard Investments, NH-Credit Agricole (now Amundi), HannaAllianz and LG Asset Management.
Overall Mercer has five front-office and three support staff based in Seoul, and the understanding is it will add more in line with business development.
Roberts sees the provision of global product as the firm’s biggest opportunity, notably real assets such as property and infrastructure as well as alternatives.
“Portfolio management of all of those disciplines at Mercer is based in London or Boston, so our intention would be to leverage those people, and administration out of our Dublin admin business. As we grow in Korea, we will add client support services and potentially we will hire more institutional sales people as well.”
Roberts describes as interesting a broad strategy by Korean institutions to diversify into frontier markets.
In terms of investment management, over the past year Mercer has built capabilities in Korea, Singapore and Hong Kong to cover Greater China.
Roberts adds it is looking at establishing a beach-head presence in Tokyo in early 2012. “Our intention in Japan is to partner a local organisation,” he confirms, noting that Mercer is several months into formal conversations.
“There is a desire among some Japanese pension schemes to de-risk, so we felt the best way to take that forward was to partner a local investment management business and a trust bank to offer our product sooner.”
Separately, Mercer has been striving to build out its wealth management business for private banks, insurers and family offices, having acquired Hammond Associates last year.
It is marketing its research database as a tool for wealth advisers, as well as its consulting and product manufacturing capabilities. Overall it has over $44 billion under management.
Cara Williams, global head of wealth management and technology solutions at Mercer, says: “Financial advisers [at private banks] have not had access to the same level of information that has been available to institutions, not just research but strategic dynamic asset allocation.
“We allow private banks to access that, so their advisers are better armed when they talk to their clients. It is about upping the game at the financial adviser level.”
Hansi Mehrotra, Asia-Pacific head of wealth management for Mercer, argues that improving the quality of information which financial advisers pass on to their clients should help to dampen market volatility. “Hopefully you would not see so much emotional buying.”
She suggests even the qualitative research that private banks do on third-party managers and products tends to be due-diligence based. “We think they need a framework to assess a manager to see what the likelihood is of that manager outperforming the index in the future.”
Williams states that Mercer is in the process of cleaning house, deregistering funds and reconsidering what it needs to add to its shelf.
“We are consolidating some funds,” she says. “We need to identify areas where we know we should have [products], given the research we have. We have more intellectual capital in some areas so we should put that to use. It makes sense to have a rethink where everything is located.”
Mercer is targeting second-tier organisations with its wealth management offering. Those it is known to work with include Bank of Singapore, Investec and RBS Coutts.