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Seasoned Fund Managers a Dying Breed in Korea

Posted November. 02, 2009 08:15,   


At the end of the 1990s, three stock fund managers had the Korean investment trust industry under their thumbs. Their power over the sector was so strong, they each had a nickname.

Chang In-hwan of Kookmin Investment and Securities was nicknamed “Cannon Chang” for his thorough risk management skills; Park Jong-gyu of Korea Investment and Securities was dubbed “Dream Park” for his ability to discover internal value; and Lee Chun-soo of Daetoo Securities was called “Freud Lee” for his outstanding corporate analytical skills.

An important qualification of a star fund manager back then was his ability to redeem spot funds as early as possible. As long as spot funds reached the profit target within a year, investors could redeem their money immediately, and this made spot funds work as “bates” for investors.

Therefore, fund managers with a higher rate of early redemption for spot funds were outstanding in single hit transactions.

Around the time the three fund managers dominated the industry, a trend emerged of naming funds after people such as “Park Hyun-joo No.1 Fund,” “Golden Chip No.1 Chang Dong-hun Fund,” “Kim Seok-gyu MVP No.1,” and “Hole-in-One Sohn Byeong-ho Fund.” This trend was an attempt at reverse marketing triggered by the wide mistrust investors had over the investment trust industry at the time.

The Park Hyun-joo fund, the first of its kind, bundled the transparency of mutual funds and the fame of the eponymous chairman of the Mirae Asset Financial Group. The sector began to use the names of fund managers in their products and featured them on TV commercials.

This is no longer the case in the asset management industry. Managers who ruled the industry 10 years ago either took jobs as executives at asset management companies or left the market.

The only exceptions are KTB Asset Management President Chang In-hwan, whose business card also says “fund manager” next to “president,” and Korea Investment and Securities Vice President Kang Shin-woo, who is also chief investment officer.

Kim Yeong-il, the head of stock asset management at Daetoo, is the rare case of a senior fund manager who returned to the market after a brief absence.

These examples stand out given the short lifecycle of a domestic fund manager. Fund investment is now systemically managed by fund management companies rather than by individual managers. Since they have much less leeway, building an individual reputation for a manager is much harder.

Furthermore, the average age of a fund manager is mid-30s.

One thing that has remained unchanged is the high turnover in the industry, which also accounts for the short-lived boom of the star fund manager 10 years ago. Fund managers frequently on the move were criticized in this year’s National Assembly audit of the government.

Main opposition Democratic Party Rep. Shin Hak-yong said the average turnover rate of professional asset managers rose to 48.4 percent over the past 32 months, meaning half of them left one company for another.

Renowned mutual fund manager Peter Lynch once lauded fellow manager Anthony Bolton, saying, “Just being called Bolton’s competitor itself is the highest honor.”

Bolton, a giant among European fund managers, said, “I want to see a seasoned fund manager who has been trained by tough times.” Perhaps he could have added “in Korea” at the end.