Samsung AM wins mandates, targets SWFs

Samsung Asset Management is making a concerted push to develop its overseas business, including capitalising on recent mandates in Japan and elsewhere in North Asia.

South Korea’s biggest fund house says it is targeting sovereign wealth funds in the Middle East and is eyeing a presence in Australia and Europe.

This May the firm hired a marketer in Seoul, Katsuhiro Nishioka, who was previously at Nomura Securities, with a view to re-promoting its existing funds and adding new products and channels.

The goal is to obtain more mandates from institutional investors, says Kenneth Lee, head of business development and global marketing at Samsung AM, who also covers Japan.

The fund manager has one Japanese life insurance client, the nation's largest by assets, which is looking to increase exposure into Korea's equity market through its investments arm. This is part of the Japanese firm’s move to raise its overseas exposure, Lee tells AsianInvestor.

The Tokyo-based insurer and its investments arm are looking to raise their fixed-income and equity allocations, including taking more Korean exposure. That gives Samsung AM an opportunity to increase the amount of assets it manages for the client.

And last month Samsung AM won a mandate to manage South Korean fixed-income assets from the biggest regional savings bank group in Japan. The mandate aims to boost returns by buying Korean won-denominated bonds within a one-year maturity and a fixed-yen return after swapping won for yen. This is a simple but relatively new type of product for Japanese clients, says Lee.

“The mandate is initially for $15 million,” he adds, “but we want to increase this and also sell more of this type of short-term-matching fund to other regional savings banks and institutions.”

On the retail side, Samsung works with Japanese fund houses and securities firms to sell Korean equity funds locally. These include one it launched with SMBC Nikko Securities and Sumitomo Mitsui Asset Management in December 2010, and another with Nomura Asset Management and Nomura Securities in September 2009.

Elsewhere, Samsung AM was one of three Korean managers last year to obtain an equity mandate from the biggest SWF in North Asia, says Lee, who declined to reveal the organisation’s name or the size of the portfolio.

The fund manager is also working on building relationships with three of the biggest SWFs in the Middle East and expects to win business from the region this year or next. Some Middle Eastern SWFs are looking to award mandates for South Korean equities, says Lee, declining to reveal names.

One large institution has already made trips to South Korea to carry out due diligence on managers and is likely to make a decision this year, he adds. It is likely to allocate at least $100 million to Korean equities at the first stage, and Lee expects that figure to rise to $1 billion.

As for Korean fixed-income exposure, Middle Eastern SWFs will not invest in Korean credit, as the spread between credit and sovereign debt is very narrow. Hence, “given that it is simple to invest in Korean treasury bonds,” says Lee, “they are happy to do so by themselves. So we don’t tend to offer Korean fixed income to big institutional clients.”

Samsung AM manages a large chunk of fixed-income assets for Samsung Life, which is easily its biggest client. Of Samsung AM’s $100 billion or so in AUM, Samsung Life accounts for $70 billion.

Meanwhile, Samsung AM entered the US market at the start of this year, hiring placement agents there and registering with the Securities & Exchange Commission. The plan is to manage pension and endowment money and the firm started contacting prospective clients in March.

The next step is potentially to do the same thing in Australia or Europe next year, he adds.