Troubled Asset Management Firms

It has been revealed that some of the major asset management companies that have been managing a portion of national pensions since 2002 received low grades from the National Pension Service (NPS) due to their poor results.

This fact is disclosed in the report titled, “Classification of domestic securities trust institutes” that the NPS submitted to Rep. Yang Seung-jo of the Uri Party.

It is the first time that the performances of the asset management companies that manage national pensions have been analyzed and opened to the public.

According to the report, there are six high-ranking companies, including IMM Investment Management, Tube Asset Management, Fides Investment Management, Mirae Asset Investment Management, PCA Asset Investment Management and Assetplus Investment Management. Having used national pensions from 2002 to June this year, those management companies received grades S among asset management companies managing national pension funds.

Four of those ranked S are even smaller than regular investment management companies.

Large management companies that induced considerable assets of customers showed poor results not comparable to their prominence. Most of them are already dropped off from the selected companies or on the verge of being excluded.

Shabby Performance of Large Companies –

NPS fund operating headquarters ranks those companies that have managed the fund since 2002 based on their performance.

The report says large management companies such as Daehan Investment Management and Korea Invest Management, which are second and third largest based on amount of deposition, received grades B in the field of stock trading as of late June.

In the realm of long-term allocation funds, MidasAsset Investment Management received grade C, the lowest level.

There are also some large firms that have been liquidated due to poor results. In the end of 2004, Samsung Investment Trust Management and Hanwha Investment Trust Management were left out of the nomination for stock trading and returned all of the trust assets.

In late 2003, also in the field of stock management, LG Investment Trust Management (currently Woori CS Investment management) and Dongwon Investment Trust Management (currently Korea Investment Management) were forced to give back their trust assets due to poor performances.

Mirae Asset Investment Management achieved good grades overall.

Why Large firms are dull-

Experts pick out two major reasons for bad results in large management companies.

First, their actual capacity of management is not really outstanding. In reality, it is rare that funds managed by large firms are high ranking in terms of not only national pension but also regular funds.

Secondly, it is analyzed that large management companies make so many funds that they cannot take meticulous care for the every single fund. There is also an account that large firms are not committed as much as are smaller firms. According to this, NPS is known to be unsatisfied with those unproductive management companies.

For this reason, there are emerging voices that require the innovation of the current practice of putting large firms first in allocation of money.

The Ministry of Health and Welfare and NPS are discussing a plan to relocate national pensions to small and medium management firms that show good business results instead of large firms.

leon@donga.com roryrery@donga.com