Woori Investment and Securities has teamed with SkyBridge Capital for a strategic partnership that will see one of South Korea’s largest securities firms distribute hedge fund products by the $8.2 billion US alternatives firm within Korea and Asia.
As part of the agreement, Woori I&S has invested an undisclosed sum into a SkyBridge fund of hedge funds vehicle which was not identified. The firm’s main FoHF product is the SkyBridge Multi-Advisor Hedge Fund Portfolios, which it runs in addition to other funds of funds and custom portfolios.
The partnership gives Woori I&S – a unit of Woori Financial Grop which runs prime brokerage, investment bank and wealth management businesses in South Korea – a large US alternatives ally while providing SkyBridge with a potential inroad into the country’s fledging hedge fund industry.
SkyBridge FoHF products would be offered in Korea and other markets in Asia, according to the firms, which did not elaborate.
Woori I&S runs units in China, Vietnam and Indonesia, as well as Singapore alternatives platform Woori Absolute Partners, which has a seeding programme with French hedge fund incubator NewAlpha Asset Management.
SkyBridge says the agreement is part of its plan to increase global distribution of its hedge fund products. They are offered through private bank channels in the West, with the firm previously expressing an interest in establishing similar partnerships in Asia, which comprises a small portion of its investor base.
The partnership could also help SkyBridge to gain a foothold in South Korea's nascent hedge fund market. Since 2011, the government has permitted the creation of domestic hedge funds although the sector remains small.
According Financial Services Commission data, there were 19 hedge funds operated by 12 management firms in South Korea at the end of 2012, running total assets of KRW 1 trillion ($876 million). Woori I&S sister company Woori Asset Management is among the dozen license holders.
The barriers to entry for managers are high – and are seemingly initially slanted to prefer domestic long-only asset managers – as firms need to have KRW 10 trillion ($8.7 billion) in assets under management to qualify.
Indeed, the first batch of 13 hedge fund licenses issued late 2011 were to local asset management companies, although it is widely expected that the AUM bar will be lowered in coming years to expand the pool of managers.
While the establishment of onshore vehicles by large overseas hedge funds is not expected for at least a few years, global managers, including Millennium, have shown interest in the market.
The attraction for global hedge fund giants is the large pools of capital held by South Korea’s institutions and high net worth individuals.
Data provider Preqin estimates that South Korea-based investors in hedge funds manage about $927 billion in total assets, with insurers, public pension and investment banks representing the biggest allocators.
However, it is expected to grow exponentially as South Korean investors allocate less than 1% of their AUM to hedge funds, according to Preqin, compared to the average 10% by counterparts in Hong Kong, Singapore, Japan and Australia.