SG Asset Management and Industrial Bank of Korea have signed an agreement to establish a 50/50 joint venture to manufacture investment products that IBK will distribute. SGAM is looking to acquire a local fund manager as well and consolidate it with the new JV, to give it heft.
SGAM is close to signing a similar deal in India, says Alain Clot, the firm's Paris-based CEO. The IBK agreement follows the example SGAM set in China, where in 2002 it formed a JV with Bao Steel.
IBK is Korea's fourth-largest bank, with 380 branches and 6,400 employees. It is a leader in the small- and medium-sized business market, and has lately begun to target the consumer market.
"IBK got in touch with us," Clot says. "They saw what we had done in China and wanted to replicate that." He adds IBK was also comforted by SGAM's double-A+ rating by Fitch-AMR. SGAM manages E250 billion ($300 billion) worldwide, with investment centres in Paris, London, Los Angeles and the Asia-Pacific.
Its focus in the region has been expanding distribution. "We consider our product range is exhaustive, covering 99% of the world market capitalization," Clot says. "So what we're after is distribution." In addition to its offices in Hong Kong and Singapore, SGAM acquired Yamaichi Asset Management and this year has also bought the asset management unit of Resona Bank, which it will incorporate into Yamaichi AM.
The Bao Steel JV is designed to help SGAM leverage the corporation's banking and government relationships. The JV now has around $500 million of AUM from its first fund, distributed via China Construction Bank, and is currently marketing a second fund, with two more in the pipeline for later in the year. If the JV succeeds in expanding the scope of distribution networks, Clot believes by the end of this year it will manage several billion dollars, and in three years will have become one of SGAM's most important markets.
SGAM will have responsibility for investment management, while IBK will oversee the JV's product design and distribution. SGAM intends to second one of its executives to be the JV's CEO. Clot declined to identify the candidate but says it is someone with extensive Asia experience.
He hopes the JV will not only manufacture and sell domestic product, but also serve as a channel for SGAM to market its global product range to Korean customers. "Around 50-60% of our global revenue inflows come from cross selling, such as selling a US fund to a Japanese client," Clot says. "This shows we can provide local customers with a global product range."
The JV hasn't been named yet, but Clot says it may make sense to brand it as an IKB business, because SGAM isn't a known name in Korea.