UBS, JPMorgan enter S.Korea asset manager market

By Kim Soyoung

SEOUL (Reuters) - UBS, the world's top wealth manager, said on Friday it was buying South Korea's No.3 asset manager, while JPMorgan Chase & Co. got the nod to set up an asset management firm, the latest foreign firms racing to enter a $250 billion sector.

The deals, announced on Friday, come as ING Group and Prudential Financial Inc. are reportedly in talks to buy Landmark Asset Management from Morgan Stanley, and Goldman Sachs said it would buy a South Korean asset management firm majority-owned by Macquarie Bank.

The expected enactment of the Capital Markets Integration Act in 2008, aimed at breaking down walls separating brokerages, futures trading and asset managing, is a key reason behind the latest rush, analysts say.

"The market's growth could be explosive once the act takes effect, creating a number of sophisticated investment products," said Ko Yong-uk, an analyst at Daewoo Securities.

"That will speed up the influx of more and more discretionary income, now tied up in real estate or bank accounts, into financial services products."

The Bank of Korea estimates half of South Korea's 1,500 trillion won ($1,619 billion) in individual financial assets has been put in bank deposits as of end-2006, about three times the amount consumers put into investment products, including bonds and equities.

UBS said it finalized a deal to buy 51 percent of Daehan Investment Trust Management from Hana Financial Group for $194.6 million.

Daehan, which oversees about $20 billion in assets, and trails Samsung Investment Trust Management and Mirae Asset Investment Management, will be known internationally as UBS Hana Asset Management Co. Ltd. and, locally, as Hana UBS Asset Management.

"In light of Korea's strong underlying economic growth, continuing reform of the pensions market and the increasing sophistication of investors, we believe the Korea asset management market offers very significant potential for growth," said John Fraser, head of UBS Global Asset Management.

Separately, the Financial Supervisory Service said it granted JPMorgan a license to establish a wholly-owned asset manager in South Korea, with an initial capital of 10 billion won ($10.8 million), making it the 15th foreign financial institution to enter the market.

South Korea's mandatory corporate pension scheme, introduced in late 2005 and set to cover all local firms by 2010, requires companies to outsource a fixed portion of their employees' retirement money to an outside financial institution.

This could unleash as much as an additional $60 billion by 2010, analysts say.

Major global financial forces including Macquarie Bank, Fidelity Investments and Deutsche Bank are among those currently running asset management arms in South Korea. Together, they have around 18 percent market share.

(Additional reporting by Rafael Nam and Andrew Hurst)

($1=926.2 Won)