Foreign asset managers downsizing Korean operations

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Citi's planned exit mentioned as another reason for exodus

By Park Jae-hyuk

A growing number of foreign asset management companies are pulling their retail fund businesses out of Korea, despite the government's continuous efforts to foster an international financial hub here by attracting global firms.

The pullouts are mainly attributed to the lingering slowdown in the domestic public offering fund market following the popularity of direct investments and exchange traded funds (ETFs) among retail investors here.

“The shrinkage of the public offering fund market can be seen as a reason for this phenomenon,” Korea Capital Market Institute research fellow Kwon Min-kyeong said. “The slowdown is not expected to be resolved in a short period of time.”

The latest example of a foreign asset manager trying to downsize its Korean operation is Franklin Templeton Investments, which had sought to merge with Samsung Active Asset Management in 2019 and sell its assets under management to Kiwoom Asset Management in 2020.

The U.S. firm's local subsidiary said it is in talks with another asset management firm to sell its retail operation, although it does not have any plans to shut down or stop serving institutional investors.

This came just after BlackRock and Macquarie finished restructuring their Korean operations.

Shareholders of BlackRock's Korean subsidiary agreed on April 21 with the firm's intention to sell its onshore retail fund business to DGB Asset Management, a subsidiary of DGB Financial Group, and surrender its license for the business.

“As we pursue the next stage of growth, the ability to harness the greatest potential in any market and allocate resources efficiently is critical to ensure the delivery of investment excellence our clients expect. And this is precisely what we are doing right now,” BlackRock's Head of Asia Susan Chan said in a press release, when the firm announced the deal on March 31.

Macquarie Investment Management Korea was sold to local private equity firm, Feynman, last November and changed its name into Feynman Asset Management earlier in April.

A source familiar with this issue said the Australian company's decision was part of “strategic” measures for its unprofitable businesses in Korea.

Other global asset management companies also left the Korean market several years ago. JPMorgan Asset Management sold its Korean unit to Hanwha Asset Management in 2017, and Goldman Sachs shut down its Korean asset management unit in 2012.

Industry officials point out Citigroup's planned exit from the Korean consumer banking sector may accelerate the exodus of foreign asset management firms, because they have relied heavily on the U.S. bank's local subsidiary when they sell their retail funds here.

According to the Korea Financial Investment Association, Fidelity's local subsidiary raised 15 percent of money to manage its funds through Citibank Korea as of February. The Korean units of Schroders, AllianceBernstein and BlackRock also raised over 10 percent of the money to manage their funds through the bank.

In contrast to domestic asset management companies having banks and securities firms as their affiliates, foreign firms have mainly used Citibank Korea and Standard Chartered Bank Korea to attract customers. Citi's exit is therefore widely seen as the disappearance of one of their major sales channels.