[Asia Exclusive] "Targeting 50 Trillion in Assets Under Custody... Racing Toward Top 5 Domestic Asset Management"

Pioneering New Markets in Overseas Alternatives and ETFs
Key Focus on Hiring... Assets Under Custody Growing

Achieved 4th Place in Industry Just 2 Years After Entering ETF Market
Emphasizing Low-Cost, Differentiated Product Lineup

ESG Funds Expected Reflecting Interest in 'Good Investment'
Developing Online Products for Untact Environment

[Asia Economy Reporter Minji Lee] "Last year, we showed the highest growth rate among domestic asset management companies. Although the operating environment has become more challenging than before, NH-Amundi will leverage its unique competitiveness to establish itself as the 5th largest asset management company in the industry."

Baek Young-hoon, CEO of NH-Amundi Asset Management, clearly expressed his intention to become a comprehensive asset management company ranked within the top 5 in the industry during an interview with Asia Economy at the company's headquarters in Yeouido, Seoul, on the 30th of last month. He aims to increase assets under management by 40 trillion won to 50 trillion won in the second half of this year, securing a place among the top five domestic asset management companies.

Baek Young-hoon, CEO of NH-Amundi Asset Management, is being interviewed by Asia Economy on the 30th. / Photo by Moon Ho-nam munonam@

NH-Amundi Asset Management increased its assets under custody by 9 trillion won last year alone through balanced growth in equities, overseas, bonds, and alternative sectors. Since CEO Baek took office in August last year, the growth pace has accelerated. He explained, "In a low-interest-rate environment where rates have fallen to the 0% range, there are limits to generating the expected returns investors want by managing domestic assets," adding, "We are making efforts to find new markets beyond traditional domestic assets (stocks, bonds, real estate)."

The solution CEO Baek found is the alternative market overseas and the exchange-traded fund (ETF) market domestically. In the alternative market, he is particularly focusing on the infrastructure sector. The scale of infrastructure assets is 2.5 trillion won, with 90% overseas and 10% domestic. Major projects include wind power in Finland, solar power in Australia, gas combined cycle power plants in the United States, and pipelines in the United Arab Emirates.

Regarding the real estate market, where domestic asset managers have been notably active, he took a somewhat conservative stance. Currently, the hotel, leisure, and aviation sectors have seen a significant decline in investment returns due to the COVID-19 pandemic's adverse impact on the industry. CEO Baek said, "In cases where investments are made in undeveloped or intangible real estate, the construction period has been significantly delayed due to COVID-19, and guarantees are provided by the private sector, increasing the likelihood of a bad fund crisis," adding, "Infrastructure investment is free from these issues." Although infrastructure assets have also experienced some delays due to COVID-19, projects backed by national or government guarantees are relatively less risky. Compared to the real estate market, the impact of economic cycles is smaller, and there is sufficient demand for renewable infrastructure such as wind, solar, and biomass, allowing asset managers to manage returns more stably.

To this end, he devoted considerable effort to hiring excellent personnel. Rather than worrying about the labor costs of asset managers, he focused more on the next two to three years. The alternative sector is highly competitive in attracting top talent as all financial institutions show great interest. CEO Baek said, "Although we are not a large asset management company, we proactively sought outstanding talent," adding, "In a short period, assets under custody in the alternative sector have increased by about 1.6 trillion won compared to before."

Baek Young-hoon, CEO of NH-Amundi Asset Management, is being interviewed by Asia Economy on the 30th. / Photo by Moon Ho-nam munonam@

Domestically, the focus was on expanding the ETF scale. NH-Amundi Asset Management rose to the 4th place in the industry within two years of entering the ETF market, attracting more than 1.13 trillion won in funds last year. Although competition for rankings with other asset managers ranked 5th and 6th is fierce, NH-Amundi has shown a relatively rapid growth rate in a short period compared to others. CEO Baek emphasized, "Until two years ago, large asset managers led the ETF market, and there were many opinions against launching ETFs," adding, "After deciding to enter, we focused on introducing low-cost, differentiated product lineups."

'HANARO200 ETF' is a popular product of NH-Amundi Asset Management. It is the most basic concept betting on the rise of the KOSPI 200, a market dominated by Samsung Asset Management and Mirae Asset Management with overwhelming market share. CEO Baek introduced a fee rate of 0.036%, significantly lower than the industry average of 0.1%, breaking the market dominated by large asset managers and attracting over 1 trillion won in funds. By imprinting 'HANARO' in the market with a low-fee strategy, CEO Baek plans to attract market sentiment again in the second half with differentiated products. He said, "We are preparing to launch a global REITs ETF in the second half," adding, "We will discover new products that other asset managers have not introduced, such as e-commerce and global luxury ETFs."

For example, the 'HANARO Global Luxury ETF' launched in the first half is a product inspired by changing consumption trends after COVID-19. It tracks the S&P 500 Luxury Index, investing in 80 luxury companies worldwide, including Daimler-Benz, Louis Vuitton, and Herm?s. Although this product, established on May 12, has seen limited gains due to the sharp rise of major indices after COVID-19, it is currently recording double-digit returns. CEO Baek said, "We are also preparing to launch a global REITs ETF," adding, "We will strive to discover new products that other asset managers have not introduced."

In the second half, NH-Amundi will introduce ESG (Environmental, Social, Governance) funds to lead the 'second Pilseung Korea Fund' craze. This is closely related to NH Nonghyup Financial Group, the holding company, emphasizing ESG management beyond financial factors for sustainable growth earlier this year. The market has shown that companies with high ESG ratings tend to have higher returns, increasing interest in 'ethical investment.' NH-Amundi Asset Management has been managing socially responsible equity funds entrusted by large domestic pension funds since 2006. CEO Baek explained, "The reason we could create the Pilseung Korea Fund was that we focused on investors' needs and social changes," adding, "In the second half, we will launch ESG funds composed independently without being bound by existing indices."

Additionally, CEO Baek plans to strengthen the development of online-exclusive products to respond to the increasing demand for untact (non-face-to-face) services. In the post-COVID-19 era, the company will expand advisory services using artificial intelligence and robo-advisors and actively work on establishing related systems and regulations.

Consumer protection and risk management functions will also be enhanced. The company is determined to introduce a high-difficulty product system and maintain strict risk management and compliance frameworks. CEO Baek emphasized, "Looking at recent cases like Lime and Optimus, insufficient risk management and compliance systems were among the reasons for redemption suspensions," adding, "As a large public asset manager, we will thoroughly conduct pre-risk assessments of portfolios to prepare for market shocks." Since its establishment in 2003, NH-Amundi Asset Management has not experienced lawsuits or non-performing assets.

Cooperation with Amundi, the joint venture (JV) partner, will also be strengthened. Amundi, one of the world's top 10 asset managers and the number one in Europe, will introduce its excellent funds to the Korean market and integrate its management know-how into the company. CEO Baek said, "Amundi has considerable know-how in asset allocation, and we will enable our asset managers to learn from this."

Interview by: Jo Young-joo, Head of Capital Markets Department

Compiled by: Minji Lee ming@

Photo by: Moon Ho-nam munonam@