Schroders veteran builds local manufacturing
KS Jeon eyes new opportunities in institutional and corporate pensions markets
By Tan Lee Hock
In a market in which staff turnover is seen as high, higher than say the markets in Hong Kong and Singapore, it is remarkable that KS Jeon, the chief executive officer of Schroders in Korea has held down just two jobs in the last 30 years in Seoul. His first was when he joined Korea Investment Trust Company in 1980, then the largest of the three investment management companies where he stayed for 14 years; there, he worked his way up the ladder, spending time in the research, sales and marketing and fund management departments, including a move to London as a research manager for three years from 1987 to 1990.
In 1994, Mr. Jeon accepted an offer from Schroders to establish its rep office in Korea, becoming the first foreign firm to do so when the local industry was only just on the cusp of opening up to foreign fund houses. The office was subsequently upgraded to a wholly-owned subsidiary in 2001.
"When I started out in 1980, fund management was very much in its infancy and the market was still closed to foreign portfolio inflows," said Mr. Jeon. But those were heady days as the government already had drawn up plans to drop barriers to entry of these inflows. In those days, he recalls, work hours were long. "I often had to stay back in the office until one or two in the morning and had to return to the office at 9 am so I thought that was the kind of career that I had chosen but I was committed," explains Mr. Jeon.
In January 1981, the policy to open up the local market to foreign investors was official. "They started to allow inflows into the local capital market before allowing domestic funds to go offshore. It was an interesting time to see the liberalisation of the market but it was also quite challenging as knowledge of global investing at that time was very low. When I joined the international team, it was certainly a steep learning curve as investing offshore was a new undertaking."
On returning to Seoul from London in 1990, Mr. Jeon continued to work in the international department and it was there that his efforts were recognised by others. In 1994, the late Peter Irving (then a fund manager of Schroders who later left the firm to establish Atlantis Investment Management) approached Mr. Jeon with an offer to establish Schroders’ presence in Korea; he took up the challenge, setting up a small office with just him and a secretary as the first two employees in 1994 and then proceeding to build a local research capability to support the firm’s investments in Korea that were managed out of the UK. That year, the firm started marketing domestic sales of offshore funds, becoming the first foreign firm to do so.
Now, 16 years after the opening of the rep office, Mr. Jeon can certainly look back with satisfaction at the progress that the firm has made. Schroders picked up a key mandate from the government to manage a US$500 million corporate restructuring fund (which was set up following the financial crisis) after one of the original managers was fired in 1999. "It was certainly a big win for our private equity team in the UK and that further cemented our position in the local market," he explains.
With the elevation of the firm’s status in 2001 to a subsidiary, the firm began marketing its capital protected structured notes in collaboration with Citi.
Its most successful product launch was six years later when the firm launched a BRIC fund. "I remember attending a meeting in Tokyo in 2005 with our product team and when I learnt about the BRIC theme, I felt that the product could do well in Korea given its attractions," he explains. The BRIC fund was launched in the second half of that year, with Citi as its main distributor, and during the launch, the bank raised more than US$100 million. But it was really during the bull run in 2007 that sales of the BRIC fund took off, which by then had virtually every major distributor on board; sales topped US$9 billion that year, pushing the firm’s assets under management in Seoul to an amazing US$14 billion. Sales were also significantly boosted when the authorities amended the capital gains tax codes to grant tax exemptions to funds that were managed within Korea, and when Schroders was able to offer funds that had international investment themes but which were managed in Seoul, it had a considerable competitive advantage over some of its competitors who found it difficult to offer locally managed funds with global themes.
Since those heady days, though, fund managers have seen steady redemptions across the board in the local market in the last couple of years and Schroders has not been isolated from this trend either.
Korean retail investors, along with their colleagues elsewhere, can be fickle, which is why fund houses want to balance their retail book of business with institutional portfolios. Mr. Jeon is taking the same approach and this is why he is building a local equity capability. "We want to raise money from local institutional investors for our local products," he says. Another area that he is setting his sights on is the emerging corporate pensions market which has about US$30 billion of assets currently. That market is only just now opening up and no doubt will be a slow process. But as Mr. Jeon can attest, the winners are often those with a longer-term perspective.