Foreign Asset Managers Outrun Domestic Firms
By Kim Jae-kyoung
Staff Reporter
Foreign asset managers operating here outpaced domestic firms last year, with their profit growth reaching 155 percent, more than double that of their domestic counterparts, according to the Financial Supervisory Service (FSS).
In its report on the 2007 performance of asset management companies here, the financial watchdog said that 15 foreign asset managers posted a combined net profit of 133.6 billion won in 2007, up 155 percent or 81.2 billion won from 2006.
The growth pace is well above the 75.6 percent year-on-year expansion recorded by 36 domestic asset management firms, which reaped a combined net profit of 307.2 billion won.
In particular, the per company net profit for the foreign players surged 138 percent to 5.16 billion won last year from 2006, surpassing the domestic players' 4.26 billion won, up 70.7 percent from a year before.
``The foreign firms' dramatic advancement was mainly due to a large increase in the sales of stock-type funds and overseas funds, which charge much higher commissions than bond-type or money market funds,'' an FSS official said.
The stock-type funds under management came to 127.2 trillion won in March 2007, up 130.8 percent from a year ago, while the overseas funds jumped 148.8 percent to 73.4 trillion won.
``Both domestic and foreign players witnessed their stock-type and overseas funds soar last year due to strong rallies in global stock markets,'' a foreign asset management company official said on condition of anonymity. ``In particular, foreign players with high exposure to overseas funds enjoyed rapid growth in profitability.''
``In addition, since foreign asset managers have richer experience in overseas markets, they have better understanding of foreign markets, especially emerging BRIC markets, which explains the foreign players' greater performance,'' the official said.
According to a survey conducted by The Korea Times, among the 15 foreign players, Prudential Financial ranked the top with net profit of 39.2 billion won, followed by Macquarie Shinhan (35.5 billion won), Schroder ITMC (17.5 billion won), Hana UBS (17.2 billion won) and PCA ITMC (11.4 billion won).
Of the total asset managers, Mirae Asset Investment garnered the largest net income of 129 billion won in 2007 thanks to great performance in its overseas funds.
``The Mirae's overseas funds totaled 20 trillion won, accounting for 30 percent of its total assets under management,'' a Mirae official said. ``Of them, the firm sold a total of 6 trillion in funds related to the Chinese market, one of the most rapidly-growing markets in the world.''
Among domestic players, Samsung ITMC ranked second with a net profit of 30.6 billion won, followed by Korea ITMC (26.3 billion won), Shinhan BNP Paribas (25.8 billion won) and KB AMC (22.4 billion won).
Backed by foreign players' handsome performance, 51 asset management companies operating in Korea enjoyed a combined net profit of 503.8 billion won last year, up 91.4 percent from a year ago.
Their profitability has also improved over the past few years, with their combined return on equity, an indicator of capital efficiency, reaching 24.4 percent in 2007, up from 15.1 percent in 2006 and 1.6 percent in 2004.
At the end of March, the 15 foreign players took up 22.1 percent of the local market with 71.6 trillion won in net asset value or assets under management.