KIC picks $400 mn global bond managers among firms with Korean subsidiaries

  • 2017-04-06

Korea Investment Corporation (KIC) has introduced new requirements to foreign bond managers that they have South Korean subsidiaries which will not be closed or sold in the near future, when it recently selected J.P. Morgan Asset Management and AllianceBernstein to entrust $400 million for global bond investments.

In the first such move by a South Korean limited partner, the sovereign wealth fund hopes to contribute to the government efforts to being positioned as a financial hub in northeast Asia by encouraging global asset management firms to run their own operations in the country. Goldman Sachs Asset Management pulled out of South Korea in 2012.

For the $400 million mandates, KIC required that management firms run bond portfolios benchmarking the Barclays Capital Global Aggregate Bond Index; they have more than a 30% stake in their South Korean subsidiaries; and they have no immediate plan to close or sell the Korean operations.

“Some 10 management firms satisfying the qualifications applied, and two of them were selected,” said an asset management industry source on April 5.

KIC will allocate $200 million each to J.P. Morgan Asset and AllianceBernstein.

The South Korean sovereign wealth manages $92 billion of assets entrusted by the Bank of Korea, the finance ministry and state funds.

It has not decided yet whether the new requirements will be applied to other asset classes including stocks and alternative investments.  

“It is understood that they introduced the requirements tentatively to bond managers, because management firms make little difference to the performance of bond portfolios, relative to stocks and alternative investments,” said the source.

To help Korean asset managers improve global asset management capabilities, KIC outsources Chinese stock investments to domestic asset managers. It has entrusted a combined $680 million to Korean asset managers, including Samsung Asset Management Co. Ltd., KB Asset Management Co. Ltd. and Mirae Asset Global Investments Co. Ltd., for Chinese stock portfolios.

In the first half of this year, it will allocate an additional $30 million to KB Asset for Chinese stock purchases and increase the allocation to the asset manager to as much as $200 million, depending on its performance.

Last year Korea Post has introduced new criteria for assessing proposals from global general partners that it would put more weight on post-sales management capabilities of domestic placement agents.

By Chang Jae Yoo

yoocool@hankyung.com

<Edited by Yeonhee Kim>