South Korea asset manager blames BNP AM joint venture for slow ETF start

Shinhan Asset Management’s difficulties growing exchange traded fund assets were partly the result of its former joint venture partnership with BNP Paribas Asset Management, which opposed entering the market, according to the South Korean group’s co-chief executive.

Shinhan AM co-chief Cho Jae-min said the company was “already way too late” in entering the ETF market — where having a first-mover advantage is important to securing market share — but added that it had no plans to give up its ambition to become a top player.

“BNP was against going into the ETF business, saying it was already too late and that only the top three companies would survive, and they were more interested in focusing on their overseas products,” Cho said.

“So that’s why we were very late to the ETF market,” added Cho, who took the helm in late 2021 overseeing the company’s traditional assets.

This article was previously published by Ignites Asia, a title owned by the FT Group.

BNP Paribas AM declined to comment.

Shinhan AM set up a division dedicated to ETFs in April 2021, three months after it acquired BNP AM’s 35 per cent stake in the joint venture to end the 19-year partnership.

About 20 of Shinhan AM’s 25 ETFs have been listed since 2021, according to Korea Exchange data.

By contrast Samsung Asset Management, the largest ETF player in South Korea, launched its first such fund in 2002 and now has about 160 listed on the main bourse.

After the joint venture ended, Shinhan AM judged that it would fall behind its competitors if it continued to sit out on the country’s growing ETF space, Cho said.

Shinhan AM is South Korea’s fourth-largest fund group by assets, but only its eighth-largest ETF player.

The company’s ETF assets totalled Won1.24tn last week, accounting for 1.3 per cent of the Won94.12tn ETF market and equivalent to 3 per cent of the total ETF assets controlled by market leader Samsung AM, according to Korea Exchange data.

Cho said expanding Shinhan AM’s ETF business was at the top of his agenda, but added that it would be a challenge because the sector was already dominated by Samsung AM and Mirae Asset Global Investments, which together accounted for almost 80 per cent of the market.

“It’s not easy for us, a latecomer, to catch up with first-comers, but we’re rapidly growing,” Cho said.

The company’s ETF assets have more than doubled from Won526.05bn two years ago, surpassing the overall ETF market growth rate of 1.5 times, according to the Korea Exchange.

Joint ventures between South Korean and foreign groups were “difficult” to navigate, Cho said.

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One of the challenges in operating such joint ventures was having different thoughts on the direction of the company, he added.

Global companies often came into South Korea, he said, expecting to be successful using strategies that had worked in other markets.

“To succeed in Korea, companies have to localise, but [joint venture partners] often try to apply their global playbook, creating conflict in product development and sales,” Cho said.

*Ignites Asia is a news service published by FT Specialist for professionals working in the asset management industry. Trials and subscriptions are available at ignitesasia.com