Park Hyeon-Joo has a striking role model. The South Korean mutual fund tycoon draws inspiration not from legendary stock pickers like Warren Buffett or Mark Mobius but from Genghis Khan, the 13th-century Mongolian warrior who conquered much of Asia and laid the groundwork for an empire that would span most of Asia and Central Europe.
“He built the biggest empire the world has seen, and he did it with a kingdom of just 2 million people,” Park says with a bright smile, while sipping iced Korean barley tea in his antique-filled office at Mirae Asset Tower in Yeouido-dong, Seoul’s major financial district.
Like his idol, Park wants to conquer the world. In the past 18 months, as many Western financial conglomerates have cut staff and shed assets, he has led Mirae Asset Financial Group, South Korea’s largest mutual fund manager, on a global expansion spree. The company has opened investment subsidiaries in London, New York and São Paulo to go with its existing operations in Hong Kong, Ho Chi Minh City and Mumbai. The 52-year-old chairman aims to make Mirae, which means “future” in Korean, the biggest asset management company in Asia and a global leader in mutual funds that focus on emerging markets. Although Mirae Asset is focusing most of its attention on retail investors in Brazil, India and other major emerging markets, Park also hopes to gain a foothold in the European and U.S. markets among institutional investors and, eventually, retail customers.
“When it comes to developed markets, we cannot compete with global players such as Fidelity and Schroders, but we can compete with them in emerging-markets funds,” Park told Institutional Investor in a recent interview. “We want to be the leading company in emerging markets. We know exactly what emerging markets are, better than other competitors, because we grew up in this area.”
Park’s goals are ambitious, but Western fund managers would be wise to take him seriously. In little more than a decade, he pioneered South Korea’s mutual fund industry and built Mirae Asset into the country’s largest fund provider, with 66 trillion won ($59 billion) in assets under management as of January 15. The company boasts a leading share, of more than 30 percent, of South Korea’s 114 trillion-won market for equity mutual funds, according to the Asset Management Association of Korea.
“It’s possible that a Korean financial services company can be successful globally,” contends Michael Chung, an equity analyst with Citigroup in Seoul. “Within Asia, Mirae Asset could be another [top brand like] Samsung or Hyundai, but to be a name brand in the U.S., it may take more time. In Asia it already is recognized highly by a lot of global investors. It’s a great company with a great management.”
Mirae Asset may be able to make quick inroads into other emerging markets, where investment habits are still in the formative stage. According to a recent survey by Investments & Pensions Europe magazine, as of March 2009 the company managed €18.7 billion ($26.4 billion) in emerging-markets equities, which includes those of South Korea, ranking it second behind world leader Barclays, with €29 billion, and ahead of players like State Street Global Investors and Franklin Templeton Investments. The further he strays from Seoul, though, the more Park will face stiff competition from established players with strong brands and deep pockets. Mirae Asset also has a limited track record outside of Asia and may have to alter its marketing strategy, which has relied on aggressive new product launches as much as performance to lure customers, analysts say.
“We don’t view Mirae Asset positively,” says Alfred Ming, a Hong Kong–based senior analyst with fund research firm Morningstar. “The group is just ten years old, so we don’t have much track record to judge. But we can say that unlike Templeton or Fidelity, which attract institutional investors through pure fund performance, Mirae Asset grows primarily through aggressive marketing campaigns and asset accumulation growth.”
Park dismisses the skeptics and insists that now is the perfect time for Mirae Asset to go global. The financial crisis has severely damaged many developed economies, but most emerging markets — particularly those in Asia — continue to enjoy good growth. “This is a good time for Asia,” he avers. “When I evaluate a country, I look at the history of the transition of manufacturing, which has been from Europe to the U.S. to Japan, and now to China and emerging markets. I believe the countries that are competitive in manufacturing will lead the world.”
South Korea’s rise as a global economic power has certainly provided a solid base for Mirae Asset to develop. Mirae Asset Financial Group, a privately held company that is 60 percent owned by Park, is one of the country’s largest financial services conglomerates. In addition to Mirae Asset Global Investments Co., the fund management arm, the group owns publicly listed Mirae Asset Securities Co., South Korea’s No. 3 brokerage firm by market value; Mirae Asset Life Insurance Co., the country’s fifth-largest life insurance firm by premiums; and a real estate investment arm, Mirae Asset Maps Global Investments, which has invested in more than 20 projects in Hong Kong, Seoul and Shanghai that are valued at upwards of 9 trillion won. Altogether the group manages $84 billion in assets. The fallout from the global financial crisis contributed to a 23.6 percent decline in net income in the fiscal year ended March 31, 2009, to 330 billion won, though revenue rose by 33 percent, to 5 trillion won.
Mirae Asset’s brokerage arm has established a Hong Kong equity sales and trading operation over the past year, but the group’s main vehicle for overseas expansion is the fund management arm.
Mirae Asset isn’t the only South Korean firm expanding abroad. Samsung Securities Co. began offering investment banking services in Hong Kong last year, and Woori Bank announced that it was opening outlets in Beijing, Shanghai and Jiangsu province in China.
The financial crisis is giving Asian companies a chance to grow, notes Jonathan Slone, chairman of CLSA Asia Pacific Markets in Hong Kong. “Mirae Asset has created an international-class management,” he says. “I don’t think there is an international barrier to what it takes to succeed. I don’t see why the Anglo-Saxon world has to have a monopoly on operations globally in the finance space.”
In a country where chaebol, or large conglomerates, dominate the business and financial landscape, Park is a maverick who succeeded by branching out on his own at an age when most executives are locked into a steady career track.
Park grew up in a middle-class family and gained a bachelor’s degree in business administration from Korea University. He began his career as an investment professional at Dongwon Securities Co., a leading brokerage firm, in 1986. He rose through the ranks to become chief of the firm’s regional headquarters in the affluent Seoul district of Kangnam, a post that made him broker to many of the firm’s top clients.
Park gained vital experience in other ways, too, at Dongwon. In 1987 he borrowed 100 million won from his mother to invest in stocks, only to see his holdings plunge by 30 percent in value in the stock market crash of October of that year. Fortunately for Park, the market rebounded swiftly; the following year he was able to pay his mother back with 17 percent interest. “It was a great lesson,” he says with a grin. “I learned not to start a business with borrowed money.”
In 1997, Park left Dongwon to launch Mirae Asset and capitalize on new legislation authorizing the creation of mutual funds. His debut was distinctly modest. He started the firm with his own savings and backing from a handful of investors, and began with only seven employees, including himself.
The conditions at the time were daunting, to say the least. Park was going out on his own just as the Asian financial crisis hit, sending the South Korean economy and stock market into free fall. The timing turned out to be exquisite, though. His Park Hyeon-Joo Fund I, Mirae Asset’s initial offering and the first mutual fund launched in South Korea, bet heavily on blue chips such as Samsung Electronics Co. and SK Telecom Co. and profited handsomely when the South Korean economy and stock market roared back to life beginning in 1998. The fund posted a return of 95 percent in its first year and established Mirae Asset’s reputation among South Korean investors.
The company used aggressive media campaigns to build its presence. Mirae Asset advertises heavily on South Korean television and radio, in newspapers and on outdoor billboards, and is ramping up that effort in other markets to develop its brand globally. Mirae Asset spent $20 million last year on its worldwide branding campaign and signed Shin Ji-Yai, a golfer who dominated the U.S. Ladies Professional Golf Association tour in her first year in 2009, to a five-year sponsorship worth $7 million.
The company’s advertising has succeeded in building a large and loyal following among South Korean investors. Mirae Asset’s campaigns advise middle-class savers to become regular investors by putting as much as 10 percent of their monthly incomes into the company’s rapidly expanding roster of funds. The company boasts 6.4 million account holders in this country of 48 million. That represents nearly a third of all retail brokerage customers in South Korea, more than three times the market share of runner-up Shinhan BNP Paribas Asset Management, according to the Korea Financial Investment Association. Mirae Asset’s original seven employees have grown to some 11,000, of which 300 are based outside of South Korea.
“Mirae Asset came into the market at the right time, introduced mutual funds in South Korea and was very aggressive,” says Neil Katkov, Tokyo-based head of research in Asia for New York–based financial research firm Celent. “It was an early entrant and stuck with the strategy. It’s quite a success story.”
A strong domestic performance has also fueled Mirae Asset’s growth. Fifteen of the company’s 16 largest funds have outperformed the industry’s average 33 percent cumulative return in the three years ended December 31, 2009, according to South Korean fund research firm Zeroin Corp. The company’s largest South Korean equity fund, the 2.7 trillion-won Mirae Asset Independence K-2 Class A, has posted a 42 percent return since its launch in October 2006. Over the past five years, ten of Mirae Asset’s 12 largest funds have outperformed the 87 percent gain in the Kospi index.
Overall the company has more than 200 long-only funds in its stable, of which more than 90 percent are domiciled in South Korea. Roughly 70 percent of assets are in equity funds, 10 percent in balanced funds and the rest in fixed income and alternatives such as private equity, funds of funds and real estate investment trusts. Portfolio managers have considerable autonomy in making stock selections, but Park has set a long-term-oriented philosophy for the firm. “We have to pick stocks which are competitive and deliver sustainable profits over the long-term horizon,” he says. “We follow growth on the basis of value.”
Mirae Asset’s funds under management have fallen significantly since hitting a peak of $72 billion in May 2008, largely reflecting market turbulence. The Kospi index plunged 50 percent from its high, in May 2008, to its low, in October 2008, one of the biggest falls among major global markets, but as of mid-January has bounced back to within 10 percent of that high. Notwithstanding the big swings in valuation, Mirae Asset has garnered net inflows of more than 10 trillion won in new money since the financial crisis began, Park notes.
Success brings challenges of its own, of course. Since Mirae Asset opened up the mutual fund industry in South Korea, 67 other firms have entered the business. The competition has forced Park to look to other markets to sustain the company’s expansion. “Our 30 percent-plus market share is telling us we must expand outside of Korea in order to ensure continuous growth and to provide our clients with more diversified fund product,” he says.
Mirae Asset took a first step when it opened an investment subsidiary in Hong Kong in March 2003. It followed that up with openings in Mumbai in 2006, Ho Chi Minh City and London in 2007 and New York and São Paulo in 2008. Last May, Mirae Asset added China to the list and underscored its ambitions by opening the 31-story Mirae Asset Tower, a shimmering green-glass building overlooking the Huangpu River in Shanghai’s Pudong financial district. Park aims to expand his franchise by preaching Mirae Asset’s regular investment gospel to the growing middle classes in emerging markets and selling itself as an emerging-markets specialist to institutions in developed markets.
“Emerging markets account for 30 percent of world gross domestic product. However, only 5 percent of pension fund assets are estimated to be allocated to emerging-markets equities,” explains Park. “We foresee a continuous inflow of investments into the emerging markets. Many investors still view emerging markets to have greater risk, yet this will bring greater opportunities.” Mirae Asset had $6.2 billion, or more than 10 percent of its assets, invested in Chinese equities at the end of November, mainly in Hong Kong–listed H shares and red chips. It also had $1.6 billion in the Indian market, $1.5 billion in Hong Kong, $1 billion in Brazil and $510 million in Russia.
Few doubt the investment potential of the BRIC countries and other emerging markets, but it remains to be seen whether Mirae Asset can establish itself as a leader in that sector. “Just a few years ago, no one had heard of Mirae Asset,” says a Hong Kong–based senior executive with France’s AXA Investment Managers, who asked not to be identified by name. “They came out of nowhere, but their performance in Hong Kong hasn’t been that great so far.”
The company hasn’t exactly distinguished itself with its initial range of Hong Kong funds. Mirae Asset Asia Pacific Ex-Japan Equities Fund, which the firm began selling to Hong Kong retail investors last August, produced a return of 71 percent in 2009, below the average 77 percent gain among peer funds, according to Morningstar Asia. Similarly, the Mirae Asset China Sector Leader Equity Fund’s 75 percent return last year lagged the industry average return of 81 percent for comparable funds. The Mirae Asset Asia Pacific Consumer Equity Fund, however, produced a gain of 62 percent in 2009, well above the peer average of 47 percent.
Mirae Asset has fared much better in China. The company’s China Institutional Solomon fund, which was launched in November 2005 and invested 300 million won mainly in Hong Kong-listed Chinese companies, has delivered a 154.7 percent return through the end of 2009, outperforming the 49.5 percent gain in the MSCI Zhong Hua index of Chinese stocks freely available to foreign investors over the same period, according to Zeroin.
Like other foreign players, Mirae Asset faces tough regulatory constraints in trying to penetrate the Chinese market directly. The company has invested $212 million in China’s domestic A-share equity market under the qualified foreign institutional investor program, and is seeking approval to step up its investment. In September, Mirae Asset announced it was investing $7.8 million for a 25 percent stake in a China fund venture with Huachen Trust Co., a small Chinese firm that manages 15.3 billion yuan. The move made Mirae Asset the first South Korean company to enter China’s $338 billion fund management industry, but it trails far behind established players such as China Asset Management Co., the market leader with 265.8 billion yuan ($38.9 billion) in assets, and Bank of Communications Schroders, the biggest foreign joint venture manager, with 92.4 billion yuan.
In India, where foreign firms have played a big role in the market’s dramatic expansion in recent years, Mirae Asset hopes to become a top-ten player within five years, says Arindam Ghosh, CEO of the firm’s Indian subsidiary. Ghosh has plenty of work to do to reach his goal. Mirae Asset has opened 13 retail branches and launched four funds in the past two years, but so far has raked in a mere $60 million in assets. That’s a far cry from the $7 billion managed by Franklin Templeton, the largest foreign player in the market.
Europe is proving equally tough for Mirae Asset. The company is hoping to crack the institutional market by touting its experience in emerging-markets equities, says Hendrik Cosijn von Ripperda, head of fund sales in Europe (ex-U.K.) and the Middle East, who came to Mirae Asset after more than a decade of experience working at boutique investment houses including London’s Mulier Capital, Boston-based Liberty Global Partners and KI Asset Management, a London-based hedge fund manager. The firm has yet to win any mandates, though. “Mirae will have a tough time taking business away from established institutional players,” contends the AXA Investment executive.
On the retail side, the company is registering five Luxembourg-domiciled funds, which currently have $90 million in assets, in six European countries and is negotiating distribution agreements with commercial and private banks in a bid to tap individual investors. In the U.S. the company plans to focus its efforts on insitutions and high-net-worth investors.
To support his global fund management push, Park is building up a Hong Kong–based arm of Mirae Asset’s securities brokerage unit to provide research and execute trades for the group’s mutual funds. He has taken advantage of distress among established players to recruit foreign talent. Last year, Park hired Ajay Kapur, a former New York–based global strategist at Citigroup, to serve as global strategist for Mirae Asset Securities, based in Hong Kong. He also tapped Michael Bugel, former co-head of global equity sales at Bear Stearns Cos., as global head of equity sales.
Kapur is looking to form a team of up to 20 analysts in Hong Kong in the coming months, and Bugel is building a 20-person sales team spread across Hong Kong, London and New York. “I am trying to set up an independent, creative, intellectual, ideas-driven research shop,” explains Kapur. “We are not going to be a large, global investment bank with 100 analysts and all the administrative costs. We are an ideas team. We want to compete in the ideas space.”
Park, who speaks a smattering of English, says he is giving plenty of autonomy to his foreign recruits because they are crucial to the firm’s expansion effort. “A lot of the investment-making decisions must be made locally,” he allows. “I have to respect that. If I can’t trust them, we can’t do anything.”
Analysts agree that the injection of foreign blood should strengthen Mirae Asset. “It’s essential if you intend to succeed internationally,” says Celent’s Katkov. “It’s a good sign. If they continue to do that, it might set them apart from what one might expect from a typical Korean chaebol.”
It remains to be seen whether the formula that worked like a charm in South Korea can make Mirae Asset a major fund management player on the global stage. But Park has made good on all of his big bets so far, and the executive is not troubled by doubts.
“It is important to have a vision and to implement that vision well,” he says. “It will take time, but I have every confidence we will be a leading player in the emerging markets.”
