Korea's new asset managers survive with competitive edge

 

Most new asset management firms in South Korea end up lagging the competition due to their smaller sizes. They suffer from operating losses and even cancel registrations. However, a few firms are taking the spotlight with outstanding performances by specializing in key growth areas. 

Since 2015 when the Financial Services Commission (FSC) eased regulations on private equity funds, around 300 Korean asset management firms have been registered, as of end-2021. The new firms make up around 88% of the current 344 investment management companies in the country.

Some of the new asset managers are growing fast due to their areas of specialization, such as in domestic logistics center investment, real estate project finance (PF) and overseas properties. Among them are Kendall Square Asset Management Inc. and ADF Asset Management Co., respectively registered in 2017 and 2015. The two firms are specializing in logistics centers based in Korea.

Kendall Square has listed ESR Kendall Square REIT, Korea’s first logistics center REIT for domestic warehouses. The Canada Pension Plan Investment Board is the largest shareholder of the REIT, owning a 24.85% stake as of Nov. 30, 2021, according to its financial disclosure.

ADF, managing more than 3 trillion won ($2.4 billion) in assets, received government approval in January to launch a REIT asset management company and is set to use the REIT for domestic warehouse investments.

Heritage Capital Management Co., established in 2018, is focusing on real estate PF debt. The Chief Executive Hyun-suk Song, who formerly directed KB Securities Co.’s real estate management, is leading investments in project finance debt and construction companies’ development projects. The firm achieved 18.5 billion won ($15.2 million) net profit in 2021 and is planning to launch a commissioned REIT using real estate PF this year.

Pebblestone Asset Management Co. is one of the fast-growing new firms based on its overseas investment track record and global network. Founded in 2016 by Terry Hwang, former CEO of Deutsche Asset Management Korea Ltd., the firm has focused on overseas partnerships and value-add and opportunistic strategies. The company has led two global financial firms’ first investments in Korean warehouses -- Credit Suisse’s 120 billion won fund to acquire two logistics centers in 2019 and Hines’ warehouse development fund in 2021. Pebblestone saw 8.3 billion won of net profit last year and signed logistics center contracts worth 1 trillion won.

Tiger Alternative Investors Co., founded in 2018, has also rapidly expanded based on overseas investments including acquisition financing, infrastructure funds and real estate debt. The firm and NH Investment & Securities specialized by investing in multifamily homes in California for $220 million last September. Managing 6.6 trillion won in assets, the firm achieved 10.5 billion won in operating profit and 3.5 billion won in net profit in 2021.   

“Korea’s new and small-cap asset managers find it hard to perform well in terms of quantitative evaluation. However, some firms have their own competitive edge and are expected to steadily grow even amid market volatility,” an asset management source said.

Write to A-Young Yoon at youngmoney@hankyung.com
Jihyun Kim edited this article.