Goldman Sachs to shut Korea office
15 November 2012
News, Global, Korea
By Toby Garrod
The idiosyncrasies of the sizeable South Korean institutional asset management market have proven too much for Goldman Sachs Asset Management (GSAM), which is shutting its office there after five years of losses. The firm entered the market in 2007 with the purchase of a 160 billion won (US$147 million) joint venture set up between Macquarie and IMM Asset Management.
GSAM’s difficulties stem partly from the tough competition brought on by domestic asset management houses, which has reduced profit margins across much of the industry, and partly from a lack of interest in international investing.
“It looks like their [GSAM’s] assets under management have fallen by half since they acquired the company,” one industry veteran tells Asia Asset Management. “GSAM management was perhaps disappointed in the lack of demand for international investment products among institutional investors. Their business in Korea is primarily institutional and their local operation didn’t seem able to bring in sufficient new money.”
The source added that an over-exposure to fixed-income products, on which fees are particularly low in Korea, was another key reason.
The pullout does not end the firm’s presence in the country.
“They can provide their global investment products to Korean instructions from their main regional offices in Hong Kong and Singapore,” he adds.
The country’s asset management market dynamics partly explain the limited capacity for growth in the institutional asset management space there, particularly in regard to international investments.
“As of June 2012, there were 82 AMCs [asset management companies] in operation [in Korea], the aggregate AUM of which was approximately 312 trillion won. Out of that amount, approximately 197 trillion won (mainly sourced from retail investors) was invested in public funds, while institutional investors principally invested in private funds, the aggregate AUM of which amounted to 115 trillion won,” says Law Business Research in its 2012 paper The Asset Management Review. “In terms of foreign investments, while they were mainly focused on private fund investments, they represent only a small portion of the total investments in the Korea asset management market.”
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