Money management firms are gearing up to fight for a piece of South Korea's fast-growing institutional pie of more than $1.5 trillion, even as signs have emerged of wavering enthusiasm for the country's cutthroat retail market.
With South Korea's institutional market poised to grow strongly over the next 10 years, traditional investment management firms — and more recently alternatives firms as well — are looking to add sales professionals for that market, noted Kiwook Kim, a consultant with executive recruiting firm Russell Reynolds Associates in Seoul.
The fact that South Korean institutional investors appreciate having “someone local to liaise with” has contributed to a “very bullish” recruiting environment this year, Mr. Kim said.
Money management firms adding Korea-focused institutional sales and client service executives during the past year include: Wellington Management Co.; Aberdeen Asset Management; BlackRock Inc.; Pioneer Asset Management Inc.; Mesirow Financial Inc.; Manulife Asset Management LLC; American Century Investments; and Pinebridge Investments LLC.
The reason behind the hires — growing allocations by South Korean investors to non-domestic stocks, bonds and alternatives strategies — is likely to continue, market veterans predict.
South Korea's working-age population should peak over the next five years, but pension assets won't crest for a decade or more after that, said Woong Park, CEO of Eastspring Investments Korea.
That prospect has set the stage for increasing allocations overseas to avoid creating an asset bubble in domestic stocks and bonds, he said.
The country's biggest, most sophisticated investors — including the $350 billion National Pension Service and the $57 billion Korea Investment Corp.— have led the way overseas in recent years, but now others that had remained domestically focused are doing so as well, said Gerry Ng, Hong Kong-based CEO of Barings Asia.
South Korea's “sophisticated” institutional investors “are currently looking to further diversify their asset allocation into foreign and alternative investments,” said Kyeung-Won Min in a March 19 news release from Pinebridge announcing his hiring in Seoul as representative director and head of institutional sales for South Korea.
Market veterans say traditional money management firms have led the wave of hiring Korea-focused institutional sales staff over the past year, but increasingly alternatives-focused firms are joining the fray. Those said to be looking now to add Korea-focused sales people include Apollo Capital Management LP and Brookfield Asset Management. Invesco Ltd., with both traditional and alternatives capabilities, is said to be on the hunt as well.
According to one Seoul-based money management executive, who declined to be named, less than a handful of foreign private equity firms now have local offices in Korea, but around five more are looking to open offices now.
Niel Thassim, head of Asia for Brookfield's private funds group, said his firm is exploring how best to serve clients in Korea. While no conclusions have been reached, he believes “having local professionals on the ground to support those clients would be more effective than having people fly in and fly out.”
A number of big Korean investors already invest overseas but with the size of the business opportunity for money managers now and the strong growth prospects “this is the time for the Korean market,” added Mr. Thassim, who is based in Hong Kong.
By contrast, fierce competition in a retail market that has yet to regain the momentum lost during the global financial crisis has made it tougher for newer entrants among foreign asset management firms to gain the scale necessary to thrive, said Russell Reynolds' Mr. Kim.