Mirae Asset Sets Eyes on Pension Market
By Cho Jin-seo
Staff Reporter
Mirae Asset is a young and fast-growing company ― it was founded 10 years ago, and the eldest of its 78 executive managers is only 51 years old. The firm wants to keep its youthfulness and high spirit into the next 10 years as well, even though it is no longer a small venture company.
True, the financial crisis did leave a dent in the phenomenal growth of the investment fund powerhouse as it did in the entire industry, and some were doubtful whether its growth model based on global asset management could remain effective in the post-crisis world. Mirae rebuts such criticism.
``After the financial crisis, there was skepticism on the financial firm's growth strategy based on investment banking. But Korea's capital market is clearly embracing the era of the `money move' from savings and deposits to investment vehicles,'' the firm's spokesman said in an e-mail interview. ``Unless bank interest rates go back to as high a level as before, the flow of money into the indirect investment market will be accelerated. Accordingly, the asset management market will grow rapidly.''
The main target of its future growth strategy is the retirement and pension fund market. As the population ages, the firm believes the demand for pension investment will increase. It says it has prepared, by building a reliable system for years. ``We have made the largest investment in the retirement and pension fund sector in the financial industry of Korea,'' the spokesman said. ``We want to transplant our experience in the asset management to the pension fund business, and solidify our leadership in both sectors.''
The company restlessly seeks new opportunities. Challenge may be embedded in the DNA of Mirae. Most of its executives are in their mid- or early-40s, and its employees have worked for the firm for 3.2 years on average. Only Wall Street boutique investment firms can have such a youthful demographic. This may explain how Mirae Asset has been able to challenge customary mores of the securities and investment industry.
When it was founded in Dec. 1999, the company was an outcast in the conservative securities industry, as it did not rely on brokerage commissions. Nowadays only 37 percent of its profit comes from brokerage, about half the portion in other firms. The rest of the profit is made from its asset management, investment banking and proprietary trading sectors in a balanced manner.
These days, most securities firms are following in its footsteps ― diversifying their business portfolios and globalizing their operations, or at least that is what they say. But Mirae is a few steps ahead of them.
Before Mirae was founded, most securities firms in Korea relied on brokerage commissions only because the rapid growth of the Korean economy guaranteed almost every stock investor a good long-term return. But this caused ``agency cost.'' In other words, securities firms had the incentive to get their clients involved in unprofitable trades just to get commissions.
After the stock market experienced the Asian financial crisis and the dot-com crash, more and more investors realized that stock markets do fall sometimes and they cannot fully trust their brokers.
Mirae has encouraged clients to invest in installment equity funds, rather than buying individual shares themselves. It also aggressively bought equities in emerging markets such as China, Brazil and India. Mirae Asset Securities has five subsidiaries in five countries ― China, Hong Kong, Vietnam, the United Kingdom and the United States ― and its sister firm Mirae Asset Global Investment has a significant presence in Brazil and India as well.
In Brazil especially, its investment funds have excelled the benchmark by as much as 45 percent over the past two years, reaping returns of over 100 percent. Mirae Asset Securities hope that it can create synergy with investment managers, when it opens retail offices there. The 2014 World Cup and 2016 Olympic Games, both being hosted by Brazil, can deliver investors a bonanza, it hopes.
Thanks to this high performance on global markets and effective advertising, Mirae Asset has built an unmatched reputation for its global funds. Park Hyeon-joo, the founder, was awarded the ``Entrepreneur of the Year Award 2009'' for Korea by accounting firm Ernst & Young. He probably deserved the entrepreneurial award for the whole decade between 2000 and 2009.
Honors continue. Last week, the Financial Supervisory Services announced that Mirae was one of three best bond dealers in Korea. More importantly, it is the only firm that has stayed in the top three for two years since financial regulators began to rank dealers.
Mirae's success story attracted the attention of case-study writers at Harvard Business School. The company said the school will use the firm's case in a class titled ``International Entrepreneurship'' beginning this April.
Harvard business cases are sold to many other business schools for as long as 10 years or beyond. This means that by the time the Mirae Asset case is being read by MBA students around the world, Mirae will have a totally different status in the global investment market. Whether that will be good or bad depends on the firm. But the odds are, it seems for now, that it will continue its energetic growth on the global market.