[Asia Exclusive] "Overseas Alternative Investments Rising Again, New Growth Opportunity Post-Pandemic"

Sangtae Kim, Co-CEO of Shinhan Financial Investment
Focus on Generating Returns from Alternative Investment Assets This Year
Growing Domestic Investor Interest in REITs Assets
Discovering New REITs in Overseas Offices and Retail
Strengthening ECM and DCM... Confidence from Successful IPO Experience

Kim Sang-tae, President of Shinhan Financial Investment. / Photo by Dongju Yoon doso7@

"As COVID-19 subsides, overseas alternative investments are gaining attention again, presenting opportunities for profit."

Kim Sang-tae, Co-CEO of Shinhan Financial Investment and newly appointed Head of GIB this year, is closely watching overseas alternative investments. He believes that as overseas alternative investments, which were nearly absent during the COVID-19 pandemic, revive, various profit opportunities can be seized. He also plans to focus on strengthening the equity capital market (ECM) and debt capital market (DCM), which are immediate challenges for Shinhan Financial Investment.

Setting ambitious goals for this year, Kim is already delivering excellent results in the investment banking (IB) division. In the first quarter of this year, Shinhan Financial Investment’s IB division recorded operating revenue of 95.7 billion KRW, a 160% increase compared to the same period last year. Kim plans to further boost performance by strengthening the IB division company-wide this year.

- What are the main sources of profit you have in mind for this year?

△ This year, the focus is on alternative investment assets. Before COVID-19, domestic interest rates were low, and pension funds were increasing overseas alternative investments, so we engaged heavily in mezzanine investments with good returns in energy infrastructure, offices, hotels, and acquisition finance for global corporate M&A, then sold down domestically. However, after COVID-19, many businesses deteriorated, causing difficulties for IB and investment institutions. I consider this a costly lesson learned. Going forward, we plan to concentrate on overseas alternative investments with renewed focus.

- Specifically, what kind of overseas alternative investments do you plan to pursue?

△ Alternative investments are constantly changing trends, so we must keep up. Personally, I see great potential in the REITs market. REITs are not a difficult business, and they held up well during stock market corrections. To keep pace with inflation, domestic investors’ interest in REIT assets will grow. We want to discover new REITs in developed markets such as the U.S. and Europe, including offices, retail facilities, and department stores. Besides REITs, we are also considering investing in non-performing loan (NPL) assets, which are not well handled within the institutional framework.

- What are the strengths, weaknesses, and areas for improvement in Shinhan Financial Investment’s IB division?

△ We have strong collaboration within Shinhan Financial Group. When investing in certain assets, the bank takes relatively safe senior positions, allowing financial investment and capital to invest in higher-yield mezzanine deals. This gives us an advantage in real estate finance and acquisition finance businesses. However, we are weak in traditional ECM, DCM, especially initial public offerings (IPO). Currently, Shinhan Financial Investment has no IPO track record for several years.

- What is your strategy for strengthening the IPO division?

△ IPO underwriting does not happen overnight. We do not only aim for large companies but plan to steadily build successful experiences even with smaller companies, so we can seize opportunities when they arise. Therefore, we plan to undertake many meaningful and market-interesting underwriting projects. Our employees have excellent skills, qualifications, and attitudes. If we provide them with some successful experiences, I believe the division will mature into a more confident and robust structure.

- What is your strategy for the DCM division?

△ Shinhan Financial Investment’s DCM ranks 5th or 6th in the industry, and there is no room to fall back further. I emphasize to employees that our sales weapon is urgency. DCM will move beyond simply arranging corporate bond issuances to fulfilling customer needs. If there are financial advisory or project opportunities at the group level, we will collaborate to create investment opportunities. In fact, we have an industry team within the DCM organization composed of former research analysts. This team provides solutions from the perspective of companies and groups to support IB deals.

- How is real estate finance progressing?

△ Real estate finance is a business with significant policy variables. Risks depend on the new government’s real estate policies. To manage risks, since last year, we have diversified target assets focusing on prime projects in Seoul and Gyeonggi Province. Logistics centers were popular in the past, but recently there are talks of oversupply even in logistics centers. Therefore, we are promoting the data center business, where we have strengths, and expect results in the second quarter. Shinhan Financial Investment actually has about two data center track records. In the first quarter, we also underwrote the 628 billion KRW Jukjeon Data Center development project. Additionally, we arranged bridge loans for the project developing the Millennium Hilton Hotel opposite Seoul Station. We also secured a deal for the 3.4 trillion KRW Metropolitan Area Express Railway (GTX)-A project together with the bank.

- What is your stance on government policies and financial regulations?

△ The previous administration pursued many consumer-oriented financial policies. However, investors entering the securities market differ somewhat from bank customers. While consumer protection is necessary, it is also important to distinguish based on investor profiles to some extent. Moreover, new businesses that did not exist before are emerging, but due to insufficient regulations, many cases have failed to lead to listings. I believe that if regulations keep pace quickly, the competitiveness of the capital market will improve accordingly.

△ Born 1965 △ Korea University, Business Administration △ Joined Daewoo Securities in 1989 △ Head of Corporate Finance at KDB Daewoo Securities in 2004 △ Head of IB Division at Meritz Securities in 2007 △ Head of Corporate Finance at Eugene Investment & Securities in 2010 △ CEO of IB Division at KDB Daewoo Securities in 2014 △ CEO of IB1 Division at Mirae Asset Daewoo in 2016 △ President of IB at Mirae Asset Securities in 2018 △ Head of GIB at Shinhan Financial Investment in 2022