Mirae Asset - Wisdom in diversification
Mirae Asset’s total AUM of about $110bn is globally managed by three core affiliates including Mirae Asset Securities, Mirae Asset Life Insurance and Mirae Asset Global Investments. Set up in 1997 with a capitalisation of $1m, it is now a global operation with 20 networks around the world.
1. How has the Asian asset management landscape changed in the last five years?
Asia’s asset management landscape has been impacted by the Lehman Brothers bankruptcy and its aftermath. As a result, global investors are maintaining their preference for safe assets and those with less volatility and higher stability. As a group, Mirae Asset has expanded within the fixed income funds sector and also alternative assets such as real estate. In South Korea, foreign bond funds have grown quite rapidly in popularity.
2. Do institutional investors need to rethink the term “diversification”?
In the past, there was a tendency to consider the diversification of the investment in terms of asset type, such as bad receivables and private equity funds, and of regions, like emerging and frontier. But the financial crisis proved such an approach was inadequate to hedge unforeseen risks. For a more stable portfolio, rather than simply increasing the number of countries or types of assets for diversification, it is imperative to thoroughly analyse the expected return and the accompanying risk. It is the source of risk including slow growth and inflation that should be diversified. On equity portfolio diversification, one should try to garner the diversification effect by allocating assets based on sector and product. In this sense, the key determinants in classifying the diversification become competitiveness, innovativeness, structural growth and company revenue flow as part of the corporate business model.
3. Which are the Asian markets that Mirae Asset is focussing on right now and why?
Recently, we launched a business in China through a joint venture with a local entity (Huachen Trust). We not only hope to introduce our innovative financial products investing in emerging markets locally but also offer new investment opportunities in China to our South Korean and foreign investors. Japan is another country that we find important. We plan to further strengthen our partnership with local counterparties in Japan. In Hong Kong and Singapore, we plan to intensify marketing of the Mirae Asset Sicav funds. I have also come to see that the Southeast Asia region is very important and interesting. Nations like Indonesia and Malaysia are a primary axis of theAsian success story. These countries come with the essential factors for accelerated economic growth - population and favourable demography, rich resources and potential for urbanisation.
4. How important is China in Mirae Assets’ long term ambitions?
The US and China are the two countries pivotal in Mirae Asset’s advancement into overseas markets. The US will maintain its unchallenged leadership in the global market in terms of politics, economy and culture. China will continue to be one of the fastest growing nations in Asia. I have positive views about China’s future economic growth - its capital market will also grow in step with its burgeoning economy. From the mid-to-long term point of view, we expect new investment opportunities to emerge as China’s economy grows in quality. Eventually, the Chinese government will pursue various reforms to transform the Chinese economy from an investment-led structure to a consumer-led economy and thereby try to foster economic stability. What we need to watch closely is how China’s reforms will impact corporate earnings, especially profits, in the process.
5. What is your overall investment philosophy?
My top priority is making sure that companies I invest in are competitive. I also believe in long-term investment and weighing possible return against accompanying risks to know exactly what I am getting into. As long as you know what is in store, you can respond readily and flexibly for the best possible outcome for clients, especially in times of uncertainty.
6. What is Mirae Asset’s overseas strategy?
We initiated the global expansion starting with the Hong Kong office in 2003. Our expansion strategy lies in setting up asset management companies offering competitive products first, and we have done so for the last decade to pave way for the securities companies to follow suit. At first, we set up our corporations ourselves and then localised the operation and organisation. But, recently, we have been acquiring local firms in order to accelerate market entry in Taiwan, Canada and Australia. We plan to continue this overseas expansion.
7. What is your view on the mid- and long-term domestic investment environment?
I expect South Korea will also suffer from low growth at least in the next couple of years because it is difficult to expect rapid improvement in the export sector when the European debt crisis persists and China’s economic growth is expected to slow down. In terms of asset allocation, it is time to consider building defensive portfolio to secure stable return.
8. What is your advice to the foreign investors considering investing in South Korea?
I expect global economic growth to slow down making the possibility of expansion in assets very unlikely. This means it is necessary to reduce individual as well as institutional leverage in order to stay flexible in times of volatility. The global market will continue to be led by a minority of leaders, while uncompetitive companies will face serious challenges. This is why it is important to search for sound and competitive companies in emerging markets, which is becoming the new centre of consumer spending. I would say though, investors should take a deep breath and seek wisdom in diversification of their asset allocations.