Mirae upgrades international ETF efforts
Mirae Asset Global Investments is doubling down on its bet that exchange-traded funds can restore the Korean investment firm to primacy. First, it is appointing Howard Atkinson as global head of ETF sales and marketing. Second, it is preparing to enter the Japanese market.
Over the past few years, at home, Mirae was caught flat-footed by the move by arch-rival Samsung Asset Management into ETFs; Samsung now has a dominant market share, particularly in leveraged and inverse ETFs, beloved by retail punters.
However, last year saw Mirae aggressively break into the business, under the auspices of Lee Taeyong, president of the firm’s global business unit and ETF business unit. It launched over 20 ETFs for its Tiger brand, including eight products listed in Hong Kong, and acquired Canada’s Horizons ETF Management.
Horizons’ business includes a small Australian ETF operation, BetaShares. So Mirae now has ETF activities in four markets, and is about to expand that to five.
Its approach to winning the ETF battle in Korea, and in Asia, is based on a global approach, unusual for an Asia asset manager; on integrating different parts of Mirae’s group, to leverage its ETF business (including via its securities arm, its insurance company, and a nascent prime brokerage); and by building domestic ETFs that are cheaper and more efficient than rivals’.
As a result, most of Mirae’s AUM in ETFs, now around $700 million, is from institutional clients. This is different from other ETF providers in Korea, which rely on retail investors.
Samsung's ETF business has $5.7 billion of assets, making it the fourth-largest ETF provider in Asia ex-Japan, according to BlackRock research; the leaders are State Street Global Advisors ($12.3 billion), iShares ($7.5 billion) and HSBC/Hang Seng ($6.5 billion). Taiwanese and mainland Chinese firms make up the rest of the region's top 10.
Mirae is leveraging its Horizons acquisition to push its ETF business worldwide. Atkinson is currently president of Horizons in Toronto, a role he will retain, as he also pushes Mirae’s ETF business internationally. He has been with that firm since 2006, helping to oversee its growth from $100 million to $3.4 billion in AUM.
The firm is now preparing to list its first ETF on the Tokyo Stock Exchange (where Samsung has a product already, a cross-listed version of its Kodex 2000 line, an ETF tracking the Kospi 200 index; turnover has been low). This remains subject to TSE approval, but the application was filed in June.
Ironically, the product Mirae is preparing is an ETF that invests in the listed arms of the Samsung and Hyundai chaebols, such as Samsung Electronics and Hyundai Motors.
Yun Joo-young, head of index and ETF investments at Mirae in Seoul, says such niche products trade well in the Korean retail market, and will be familiar concepts to a Japanese audience. He believes it is easy to market a specific brand such as Samsung than to promote a broad Korean equity benchmark.
He also explains that the new product will not involve cross-listing a product domiciled in Seoul. Instead, Mirae will utilise Japan depository receipts. By deploying a DR structure, Mirae hopes to boost turnover.
Yun says local investors won’t need a separate account to trade the Mirae product, as it’s just another domestic stock. A JDR can be traded using margin, and is easy to sell short under Japanese rules. “This should lead to better liquidity than a simple cross-listing,” Yun says.