Korea’s Samsung Asset Management has struck a strategic partnership with US high-conviction firm Capital Group to provide retirement and active investment solutions to domestic individuals and institutions.
In a signing ceremony in Seoul yesterday, Samsung AM – which has $166 billion in AUM – explained the companies would work together to co-develop asset allocation products.
Even though such solutions are not popular among Koreans now, Samsung AM chief executive Sung-hoon Koo expressed confidence. “We expect demand for retirement solutions and asset allocation products will surge in Korea over the next decades,” he said in a statement.
“As we look at trends – the growth of segregated mandates from institutions, asset allocation under a continued low interest-rate environment and the growth of alternative investment products – the Korean asset management industry can’t survive with products and services based solely on past market conditions.”
Capital Group chairman Tim Armour noted that Korea was facing demographic challenges in meeting the long-term financial needs of an aging population, saying Capital Group was experienced in providing long-term investment solutions to both individual and institutional investors, predominantly in the US.
The aim is for the relationship to be mutually beneficial, given that Asia Pacific represents just 1.1% ($16 billion) of Capital Group’s $1.4 trillion in global AUM.
Samsung AM spokesman Sungmin Hwang declined to give financial details of the transaction when questioned by AsianInvestor. It was unclear who initiated the collaboration and whether there would be staff changes.
“This is a first step. I can’t comment on staffing because nothing has been decided yet,” said Hwang, while adding that some Samsung portfolio managers might visit Capital Group in the US to learn more about its active management system.
Samsung AM is a dominant player in Korea’s exchange-traded funds industry and won an AsianInvestor award in the category earlier this year, as reported.
“In ETFs we are very competitive, but as for active funds our capabilities are lower and we are not as competitive,” said Hwang. “That is why we chose Capital Group.”
Samsung AM is hoping to upgrade its active equity investment capabilities via the collaboration. While it has an asset allocation division for the domestic market, it will also seek to leverage Capital Group’s global capabilities to launch life-cycle products.
“These [asset allocation] products have not appealed so far, but there is a mood among Korean investors that they should start to invest in long-term pension funds,” added Hwang.
Armour suggested the broader plan would be to co-design investment solutions to fulfill the savings, retirement and insurance-linked needs of Korean investors.
Samsung AM already provides asset management services to Samsung Life Insurance.
Asked whether Samsung AM might look at similar partnerships to upgrade capabilities in other areas, Hwang said: “If we find a good, competitive partner, we might try.”
In Asia, Capital Group employs 250 associates including 11 portfolio managers, 38 analysts, eight economists and nine traders. It has offices in Sydney, Tokyo, Hong Kong, Singapore, Mumbai and Beijing.