New York Life Investment Management Holdings LLC's recently announced tie-up with Samsung Life Insurance Co. Ltd. should help the firm turn its Asia-Pacific toehold into solid footing for growth in the region, NYLIM's top executive says.
New York Life Investments Chairman and CEO John Kim said in an interview that asset-gathering opportunities in the region over the coming 10 to 20 years should be “outsized” relative to the U.S., and a “good portion” of the opportunities his company pursues as it boosts its efforts in Asia will be tied to its strategic partnership with Samsung.
On Sept. 4, the two firms announced a strategic alliance that will kick off at month's end with the launch of a U.S.-focused asset allocation fund, to be followed by other joint investment initiatives in the U.S. and Asia.
Executives from both firms painted the alliance as a means of extending the global reach of their respective money management businesses. For now, both continue to rely on affiliates for more than half of their assets under management: roughly 66% of Seoul-based Samsung Asset Management's $121.5 billion comes from Samsung Group companies, while 56% of New York-based New York Life Investments' $381 billion comes from its parent, New York Life Insurance Co.
Keun-Hee Park, Samsung Life's CEO, said in a news release the alliance with New York Life Investments will be “the foundation for Samsung to globalize our asset management business.”
Mr. Kim, meanwhile, who also serves as chief investment officer for New York Life Insurance, called the agreement a big first step toward replicating in Asia the growth that New York Life Investment's third-party business has enjoyed in the U.S. following the financial crisis.
Mr. Kim said his firm's third-party business wasn't on solid ground when he took the helm in April 2008. The unfolding financial crisis dropped assets for unaffiliated clients to a low of $68 billion, or 30% of the company's total assets under management, with that third-party business just breaking even for 2009, he said.
Fast forward to June 2013: New York Life Investment's third-party business has increased to $167 billion, or 43% of a much bigger pie. “We're on track to make approximately $250 million” in earnings before interest, taxes, depreciation and amortization this year, Mr. Kim said.
U.S. clients have powered that growth. Asia-Pacific-based clients accounted for only $6 billion, or less than 4%, of the $167 billion — including $1.2 billion in South Korea, where Samsung Life has relied on New York Life Investment to manage allocations to overseas bonds since 2001, and roughly $4 billion managed by fixed-income boutique MacKay Shields LLC for clients in Japan.
That $1.2 billion from South Korean clients is a “nice base,” but with the expanded relationship with Samsung, “we think we can be a lot larger,” Mr. Kim said.
This “initial foray into Asia” for the company — in tandem with a business group boasting South Korea's largest insurance company and largest money manager — should open doors in a market offering some of the strongest institutional opportunities in Asia, said Mr. Kim.
Mr. Kim said his firm is focusing on institutional investors as it dedicates more resources to serving clients in the Asia-Pacific region. The region's retail market will inevitably be attractive, but for now a mass affluent market keen on investing in stocks and bonds still hasn't developed, and distribution is the key to accessing what demand there is, he said.
Even so, New York Life Investment's tie-up with Samsung should offer a uniquely broad opportunity set, because in addition to the promise of greater access to institutional investors in South Korea, the asset allocation fund the firms will launch in late September will likewise “allow us to be in the retail market” as well, Mr. Kim said.
