Mirae Asset Global Investments is setting out to expand its exchange-traded fund (ETF) business globally into the US, Latin America and South Asia.
The move falls in line with a push by Korea’s Financial Services Commission (FSC) to create greater investor choice. At present, 80% of locally listed ETFs track the Korea Exchange, but only a sprinkling link to overseas benchmarks.
Mirae Asset already boasts 130 ETFs worldwide, with the highest number of products listed in Korea at 47, ahead of nearest rival Samsung Asset Management with 28 (although Samsung dominates by AUM and trading volume).
Mirae Asset’s global figure includes a suite of 75 Toronto-listed ETFs after it acquired Horizons ETFs Management (Canada) in 2011. It also has BetaShares in Australia and a branch in Hong Kong.
Yun Joo Young, head of Mirae Asset’s ETF division, notes that Horizons has an affiliate firm in the US and has recently set up a new company in Colombia to target Latin American investors.
He confirms that Mirae Asset is now setting its sights set on reaching out to the US, Latin America and South Asia.
“Within this year we will get into the US market using some niche products,” Yun tells AsianInvestor. “If we combine our local and global ETFs we can provide portfolio services to institutions.”
About 90% of Mirae’s ETF assets are institutional, mostly insurers (including its parent), mutual fund companies, securities houses and trust banks. It charges as little as nine basis points on its Tiger 200 ETF, and Yun forecasts a continuing price war globally.
This high volume, low margin institutional approach is where Mirae Asset sees growth in Korea’s ETF market. It is aiming to build its suite of products to at least 60 ETFs to provide institutions with broad-based portfolio and advisory services.
“Expense ratios will get cheaper and ETF issuers will need to provide advisory services and solutions to private banks and institutions,” says Yun. “The ETF portfolio business is where we will get profitability.”
However, not everyone agrees, including market leader Samsung, whose ETF client breakdown is 70% institutional and 30% retail.
Of the country’s 16 exchange-traded product providers, first-mover Samsung is by far the biggest at $7.8 billion in AUM for a 55% market share; Mirae Asset is second with $2.3 billion and 16.6%; and Korea Investment Management (KIM) third with $941 million and 6.7%.
Sah Bong Ha, ETF team head at Samsung Asset Management, sees faster growth on the retail side, driven by inverse and leveraged ETFs as well as wrap accounts from insurers and securities companies and trust products from banks.
“Growth will be higher among retail investors, this is why we are focusing on wrap account services,” he says.
At present ETF issuers in Korea are preparing for the introduction of synthetic, or swaps-based, products, an innovation for the market set to be permitted by the FSC from the start of next month, as reported.
The advent of synthetics will likely be an institutional story, although its impact should not be material given the entrenched nature of domestic equities and trading.
Both retail and institutional models can work. Whose will grow faster should come down to a combination of performance, price and execution of sales strategy.