Value context and insight. lkm@koreatimes.co.kr
Asset management firms hit for paying hefty wages despite poor performance
By Lee Kyung-min
By Lee Kyung-min
Workers from 50 leading asset management companies received pay raises amounting to over 22 percent over the past two years despite a clear drop in net profit, data showed Sunday.
According to CEO Lab, a financial data provider, workers at the 50 firms saw their combined salaries soar to 578.2 billion won ($495.4 million) as of June 2019, a 22.3 percent increase from 472.7 billion won in December 2016.
This came despite a 7.2 percent drop in net profit in the same period, from 577.5 billion to 536 billion won.
The hefty increase in pay is mostly explained by their operating profit which jumped to over 716 billion won in the same period, a 5 percent rise from 681.7 billion won.
However, the operating profit hike was mostly due to an increase in assets under management which jumped to over 1,046.4 trillion won in the same period, up 18.2 percent from 885 trillion won.
Assets under management refers to the total market value of all the financial assets managed by a financial institution including a mutual fund, venture capital firm, or broker on behalf of its clients and themselves.
Woori Private Equity Asset Management was the highest-paying firm with a salary-to-operating profit ratio standing at over 105 percent.
This was followed by ABL Global (49 percent), Meritz (48.5 percent), Multi Asset (47.7 percent), Truston (47.4 percent), Asset Plus (47.1 percent) and Eugene (47 percent).
Among the top industry players, Mirae Asset reported 274.5 billion won in operating profit in 2019, up 10.3 percent from 2018. Its aggregate workers' pay in the same period jumped 640 billion won, 11.1 percent.
The moderate jump is highly contrasted by scandal-ridden Lime Asset Management whose operating profit in the same period stood at 46.2 billion won, over a 48-fold increase, while workers' salaries came to 31.7 billion won, a 71-fold rise.
The pay raises being awarded irrespective of a worker's individual competence could be a cause for concern to investors, according to Sung Tae-yoon, an economist at Yonsei University.
“The asset managers among many other financial services firms have been scrutinized for failed risk management. Given their pay comes from investors' money, investors are right to feel frustrated if workers they pay become richer at the expense of their assets,” he said.
Lime was once recognized as one of the fastest growing asset management firms after reporting 11.9 billion won in net profit in the first nine months of 2019, a nearly 11-fold increase from the year before.
However, it came under scrutiny for failing to promptly liquidate assets to give money back to investors who grew increasingly unsettled over possible losses similar to those involving the derivative-linked funds sold by Woori and KEB Hana banks.