London-based Threadneedle Investments has set up an office in Seoul for developing relationships with institutional investors and hired Chris Lee from Samsung Asset Management to run it.
As chief representative for Korea, he will be responsible for developing client relationships, although the Hong Kong office will remain responsible for sales in the country.
Lee was head of overseas investment in the global business division at Samsung AM, and prior to that served as chief executive of Singapore for the same firm. Samsung AM did not respond to AsianInvestor requests for comment on his departure.
Threadneedle's move comes as Korean institutions are looking to boost their overseas portfolio exposure with a view to countering size limitations and low yields in their domestic market.
Examples include the $11 billion Teachers’ Pension and $5 billion Government Employees Pension Service, both of which are moving to raise their foreign asset allocation. Larger local players are making similar moves, including the $400 billion National Pension Service and $75 billion sovereign wealth fund Korea Investment Corporation.
Teachers' Pension's chief investment officer recently noted that 90% of the institution's investment portfolio was domestically focused, even though the country was lagging the global average in terms of GDP growth. Indeed the state retirement fund is planning to set up a dedicated overseas investment team, as reported.
June Wong, Threadneedle's vice-chairman for Asia Pacific and Hong Kong CEO, sees opportunities for global fund houses in Korea, since global allocations by domestic institutions remain relatively low.
“Korean institutional investors are seeking more diversified and global investment solutions,” she told AsianInvestor. “In addition to traditional global equities and bonds, there is growing appetite for more high-alpha and flexible strategies. These include liquid alternatives, multi-asset and other dynamic strategies.”
She admitted, however, that there will be challenges entering the market, with competition getting fiercer in Korea as more and more international fund managers eye the country.
One major obstacle in the market is the low fee expectations of institutional clients. This was thought to have contributed to Goldman Sachs Asset Management's closure of its Korean funds business in November 2012.
Market sources at the time said the closure was due to the low fees that domestic fund houses, often backed by larger financial groups and conglomerates, were prepared to offer. This squeezed out foreign fund houses, which often lack the scale to compete.
For now, Threadneedle will take a long-term view for the new office and a first step to a “more substantial growth in Korea”, said Wong. As the business grows, “we will correspondingly put more resources around him to effectively manage the growing business”, she noted, without giving specific target numbers.