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Mirae Asset’s focus on global emerging markets

Financial crisis in 1997/1998 provided golden opportunity for founder

By Henry G Morris

Not many took much notice when a young manager left one of the major Korean securities companies in 1997 and launched his own company, but before much time passed most people in Korea and even around the region came to know the manager's name, Park Hyeon Joo, and his company's name, Mirae Asset. Founded by Chairman Park in 1997, Mirae Asset has grown to be one of largest fund management companies in Korea and in the region as well. When he launched Mirae Asset in late 1997 at the height of the Asian crisis which had a devastating impact upon Korean banks and non-banking financials, not many would have been surprised perhaps if Mr. Park's new company had failed.

But although at the time the type of advisory licence that Mirae had permitted it to manage only US style corporate type mutual funds, as opposed to the standard type of Korean fund which is a unit trust fund and thus much less expensive to launch, Mr. Park was highly successful from the beginning. Despite the grim outlook for the Korean market at the end of 1997 and in early 1998, Mirae's first fund, the eponymously named, Park Hyeon Joo #1 fund, was a great success. Mr. Park managed the fund himself and demonstrated quickly his capacity as a fund manager to select the right types of equities based upon a fundamental research, value based approach to investment which resulted in Mr. Park's being able to buy shares that were deeply discounted for his portfolio. In a fairly short period of time these shares began to recover from their lows and soon word was spreading throughout the Korean market that Mr. Park Hyeon Joo was a gifted fund manager.

By the year 2000, Chairman Park had launched a number of additional funds and had obtained the investment trust licence for Mirae Asset so that his group would be able to issue Korean unit trust funds just as the other major Korean asset management companies had always done. In 2001 as the National Pension Service was beginning to invest into Korean equities via mandates to fund management companies in Korea, Mirae Asset won a mandate to manage equities on behalf of the NPS. During the early years of the decade, Mirae's assets under management continued to expand at a very rapid pace and by the middle of the decade Mirae was the market leader in public funds under management with the equivalent of over US$50 billion under management.

During this time in the early 2000s when Chairman Park was leading the Mirae Asset Group to its very rapid growth in the domestic market, he was also guiding the Group into its overseas development in foreign markets and it was often the first, or among the first of the major Korean fund management company to become active in a number of these markets. A Mirae Asset Group company opened an office Hong Kong in 2003, in Singapore in 2004, in India in 2006 and in the UK in 2007 and in the USA and Brazil in 2008. Last year Mirae Asset Global Investments announced that it would form a joint venture in China as well. With the emphasis on the BRICs countries and Korea, Mirae Asset Group has established itself as one of the more successful of the global asset management companies with a focus on the emerging markets.

Given the remarkable successes that Mirae Asset Group has achieved in such a short period of years, Mirae Asset Group has been the focus of much attention by individual and institutional investors alike. The Group's achievements are all the more impressive perhaps because Chairman Park was able to expand and develop Mirae Asset in both the domestic and international markets despite having to endure the Asian financial crisis of 1997-98 and the global financial crisis since 2008. Chairman Park was kind enough to agree to a Q&A with Asia Asset Management and this follows below.

AAM: Please explain when Mirae Asset was established and what was the motivation then behind the foundation of the company?

Park: Mirae Asset was established in 1997. Our vision then was to contribute to our client's successful investment management and help people prepare for a secure retirement, especially by seeking investment opportunities in emerging markets.

I saw the opportunity in the Korean market and wanted to contribute in developing the market by providing good fund products to our clients. At that time I was working for a securities firm, and foresaw some problems ahead for the Korean economy, so I left the securities industry to establish a venture capital firm. I saw that new business areas were being created in Korea by the transition to an information-oriented society, and sensed a paradigm shift.

When the Asian financial crisis of 1997/98 hit the Korean market, forcing many institutional and individual investors out of the stock market, I didn't miss an opportunity to invest in undervalued stocks as I still believed in the potential of the Korean economy. After that, wanting to lead innovation in the Korean market and sensing a business opportunity, I decided to establish an asset management company, Mirae Asset.

AAM: Mirae Asset is very well known for its position in equities fund management. Would you please explain briefly about Mirae Asset's approach to equities investment, or to put it another way, your Mirae Asset equities investment philosophy?

Park: Mirae Asset Global Investments Group provides a full spectrum of products specialising in emerging markets, from equity funds, fixed income funds and balanced funds to alternative investments funds. At the core of our product line are funds that invest primarily in emerging market equities.

Our investment principles include:

• Mirae Asset identifies the sustainable competitiveness of companies
• Mirae Asset invests with a long term perspective
• Mirae Asset assesses investment risks with expected return
• Mirae Asset values a team-based approach in decision-making

Mirae Assets always adheres to these principles.

I've also stressed how critical it is for investors to have a deep understanding of investment and offered education programs for investors to help them prepare for a secure retirement by investing with a long term perspective.

AAM: Many investors are impressed with Mirae Asset's approach to international markets, which appears to be based on Asian and global emerging markets. Could you please explain briefly where Mirae Asset has offices outside Korea and also the objectives of Mirae Asset's international development?

Park: I believe diversification is the key to investing. Investment assets must be diversified into other classes and other countries. Mirae Asset's expansion overseas started to move Korea's domestic assets abroad. Now, Mirae Asset's goal globally is to build credibility as a respected company in the respective societies and to become the distinguished emerging markets expert. We should always focus on creating value for our clients in Korea and world-wide. We have established offices across the strategic hubs (Hong Kong, India, UK, Brazil, USA, Shanghai and Vietnam) around the world and created a global network based on these locations.

AAM: Mirae has Mirae Asset Securities as a distributor of Mirae Asset's funds in Korea, but would you please explain briefly what other distribution methods (banks, brokers, etc) that Mirae is using for domestic and international distribution of its funds?

Park: We have many distribution platforms in Korea and overseas. We are selling our fund products through almost all channels in Korea, including major banks, securities firms, and life insurance companies.

Now we are selling our SICAV fund products in HK and many countries in Europe through various platforms. Also, we launched our funds in India and Brazil. In India, we are working with various distributors such as banks, securities firms and IFAs. In Brazil, Citibank has launched Mirae Asset's fund throughout its branches.

AAM: Aside from the Korean market, please explain which markets Mirae Asset believes are likely to be the most rearding from an investment perspective over the next few years?

Park: I am convinced that China has enormous potential but I'm also attracted by India and Brazil. All of these countries present significant challenges as well as opportunities. I believe that we are going through a great paradigm shift in the global economy today. We are living in a critical era, where we are entering a multi-polar economy. I see a great shift of wealth and economic power from the US and Europe, to the emerging markets countries.

Today, while developed markets are concerned about possible deflation, emerging markets are already trying to tame inflation in their fast-growing economies. China has developed the fastest train in the world that runs at over 380 km/hr. The Chinese government is trying to double the average employee's salary in five years in order to stimulate domestic demand. The Indian economy has experienced 7% GDP growth per annum on average over the past decade. Tata in India has developed a car called the ‘Nano', priced for the masses that costs about US$2,500 and will be exported to the US. Brazil has done a tremendous job shedding the fear of inflation, and re-shaped their economy to such an extent that it was resilient during the recent sub-prime crisis. These are just some examples of how emerging markets have delivered outstanding performance since the crisis.

AAM: Could you please explain how Mirae conducts research on companies; is it through Mirae Asset's own analysts or do you rely upon outside research?

Park: We have a solid investment process with an in-house research division, equity investment management unit, overseen by investment strategy and risk management committees. Our investment strategy committee decides on the investment universe and model portfolio based on our research division's work. The equity management business unit is in charge of running the actual portfolio, which is based on the model portfolio supplied by our research team, and the risk management committee monitors the overall investment process. Also, we have built good relationships with many global investment banks to share and take advantage of their view.

AAM: Would Mirae be likely to acquire another asset management company, either overseas or within Korea?

Park: I'm willing to acquire companies if they fit in with Mirae Asset's overall strategy. I acquired SK Insurance to gain access to its retirement plans. Foreign joint ventures are another possibility I've been open to. On September 2009, Mirae Asset concluded a 'Memorandum of Understanding' with a Chinese state-owned company to establish a joint venture, mutual fund company in China. We have also been looking for a good overseas company to acquire and enter a partnership.

AAM: Mirae Asset group has grown very rapidly since its inception. Is it your current objective to continue this pace of rapid growth, and if so which sectors, domestic equities, domestic fixed income, global equities, global fixed income, emerging markets, alternative (private equity and hedge funds) do you see as having the best growth prospects?

Park: From a macro perspective, we think the global market is deleveraging in general, so it is inevitable for the market to slowdown even though the market has showed a little bit of improvement. However, we consider that global emerging markets will be relatively a blue ocean. As emerging market experts, we would like to focus on global emerging markets or global companies exposed to emerging markets.

This is related to the concept of 'sector leader' which we are actually managing funds based on. We also believe that the concept of ‘consumer' or ‘clean energy' is a sector with good growth prospects. Each theme of the products, which we are planning to launch in the US office and other offices, is in fact focused on one among these themes.

Also, after the financial crisis, investors have shown a greater tendency towards risk aversion and a distinct preference for safe assets. We foresee rising interest in the market for global fixed income and absolute return funds. Hence, we are preparing various funds to match these themes to meet our clients' needs.