The Canadian pension fund plans to increase its allocation to the region from 10% to 15% over the coming four years, even as its total assets under management rise.
The firm has spent two years preparing for this by first building up its domestic business according to international best practices. This more conservative approach stands in contrast to the industryÆs current star, MiraeAsset, which has over the past two years opened investment offices in Hong Kong, Singapore, Mumbai and London.
There is a tortoise-and-hare element to this story, to cite the ancient Greek fable of the rabbit that gained a long lead in a footrace but then stopped for a nap, only to see the slow-moving but patient tortoise sneak past the finishing line first. Or at least, thatÆs how Samsung would see it.
MiraeÆs growth has come at a time when Korea investors have finally learned to love international investments. In particular, its locally domiciled China fund, managed from its Hong Kong and Singapore desks, has been a huge hit. Since the end of last year, Mirae has seen its assets under management (AUM) grow 50%, from W20 trillion in December to W31 trillion ($34 billion) as of mid-October, usurping Samsung for the number-one position in retail funds.
Thanks to its W53 trillion in discretionary accounts, Samsung remains the Korean industryÆs overall biggest fund house, with a total of W74 trillion to MiraeÆs W37 trillion (including its discretionary business). But SamsungÆs mutual funds have barely grown in AUM this year, and much of its overall business is in low-margin bond and money-market funds. Only about 10% of SamsungÆs business is in equities, compared to 67% for Mirae.
Um Tae-jong acknowledges Mirae has stolen a march in equities but refutes the notion that Samsung hasnÆt been innovative. It is the industry leader in indexed funds and exchange-traded funds, it has developed a quant desk, and has recently launched a China ETF that is proving popular, raising $230 million so far.
But SamsungÆs principle argument is that it has steadily built an internationally credible and competitive firm, and Um suggests Samsung has paid more attention to areas such as governance, compliance and risk management than its competitors. ôMost important is our risk management culture,ö he says. This adherence to best practices will enable the firm to attract and retain talented investment professionals overseas, he believes.
Although slow to the international scene, Um says, ôOnce we do it, we do it 100% and perfectly. ThatÆs the Samsung way. We donÆt consider ourselves to be following a trend. We are setting it. We will build our international business the same way we have built our domestic one.ö
The firm has applied to the Hong Kong Securities and Futures Commission for licenses in advisory services and investment management, and once approved, will establish an investment management and marketing presence in Hong Kong. It plans to hire entirely from the local talent pool, although the office CEO will transfer from SamsungÆs Seoul headquarters.
The firm is also considering a joint venture in China or some form of partnership to tap that market. It has applied to Chinese authorities for a license to invest in A shares, and Um plans to build a range of China- and Asian-oriented equity products for Korean investors.
The firm can also count on scale thanks to its relationships with Samsung Life Insurance and Samsung Fire & Marine, both of which are among KoreaÆs biggest internationally invested institutions. (Samsung Life now manages around $18 billion of international assets.) These firms can also use their global contacts to help Samsung Investments meet potential institutional clients outside of Korea.
China is going to be a particular focus. Samsung Group now employs 54,000 people in mainland China, a commitment that goes back to the 1980s. ôWe see the investment universe differently from global asset managers,ö Um says. ôWe want to focus on the Asia market as our core allocation, with the US, European and Japan markets as our satellites.ö
He says that the notion of æcoreÆ for Koreans is changing to reflect the central role of China and India in the global economy. (For an in-depth look at this theme, see the cover story of AsianInvestor magazineÆs November edition.)
But SamsungÆs ambitions are worldwide. Once its Hong Kong office is up and running, it plans to add resources to Samsung LifeÆs existing offices in New York and London, in order to build global investment expertise. It also plans to set up a private-equity capability in Hong Kong.
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