You intend to make Korea your fourth major market in Asia later this year. Why Korea?
Korea has the largest pool of pension money in Asia after Japan. Its saving rate is consistently above 30%. It also has a good tradition in investing in mutual funds that you don't find in other countries in the region. And it's a market that is very determined to become more open to foreign competition.
Why choose Korea over markets such as Taiwan and Malaysia?
We're looking at Taiwan, which is the second largest market after Korea. We are contacting distributors and we're answering requests for proposal from Taiwanese institutions. We're already active in Taiwan and we hope to do more. But for the time being we will continue to cover Taiwan out of Hong Kong.
Malaysia, on the other hand, lacks openness. It doesn't provide foreign houses with a free business environment. The only way we can get access is through a partnership, but we would not be allowed to hold a majority stake. It makes the business difficult. We used to have a joint-venture operation in Malaysia with Kaf Group. It started at the time of the Asian crisis and we decided to terminate it because it became clear that the growth of the mutual fund industry was still remote.
How do you view the pension industry in Asia?
The pension fund industry is driven by demographics. If you look at Asia, Japan is basically the only place where this industry has blossomed. Singapore and Hong Kong are too small. But as Hong Kongáis part of China, it might one day provide access to a much larger demographic base. Singapore needs to become a regional centre because potential is limited when you have only three million people. And Singapore knows it. But Malaysia is not likely to let Singapore become the regional centre because, as as far as I can see, Malaysia is as interested in developing its own fund management industry as Singapore. But Singapore has the potential to become the centre for India's custody business.
What's your strategy in Korea?
In Korea we'll start by setting up a representative office focusing on marketing and client servicing. We do not intend to manage assets in Korea at this stage. At the moment we are more interested in bringing our offshore expertise to Korean investors.
Why?
The appeal of the Korean market is that their ITCs [investment trust companies] can provide the infrastructure for the distribution of products. They haveáthousands of sales agents covering the whole of Korea. However, local investors may not have confidence in these companies in the near future, and that gives foreign products an edge. As far as distribution is concerned some of the ITCs remain very powerful as potential partners in Korea.
It seems more than 50% of the investors in Korea are investing directly on the internet. Do you have a specific plan to address that?
We shall have to set up a Korean version of our website. But these investors are retail clients. We're not going to target directly the retail market in Korea. Instead we are planning to be a product provider to the domestic distribution networks in Korea. We have held discussions with a number of ITCs and have formed business relationships. We will decide on a case by case basis whether we should develop products that are under the distributor's name but advised by us, or under the Indocam brand name.
As a pension manager, you were ranked last by Watson Wyatt in 1997 but number one last year. What happened?
We were an Asian specialist house managing pension funds almost on absolute return basis some years back. What happened to the Asian equity asset class from 1994 onwards was that it systematically underperformed other asset classes, especially the US equities. And as a result Asian investors started to invest outside the Asian markets. Being a purely Asian specialist, we naturally underperformed global balanced managers and that was reflected in our ranking by performance by Watson Wyatt for its MIP survey. Further to the Asian crisis in 1997, we have diversified our portfolios by investing in some US and European assets. And we became the number one manager in the Watson Wyatt MIP survey for 1999 as well as for the first quarter of 2000.
What's Indocam overall strategy to capture the pension market in Asia?
Simon Powell, the head of marketingáat Baring Asset Management, is joining us next Tuesday [27 June]. He will take charge of the sales of Indocam products in Asia. We also want to build further a track record in global balanced products. In the past, we were perceived as a specialist manager with little global balanced expertise. So now we have to prove to investors our global expertise. To do that we launched at the end of April two global balanced funds: one aggressive, one conservative. We are starting to promote the funds through our Regular Saving Plan, and soon through our Pooled Provident Plan. We want to prove that we are good at managing products with different risk profiles.
What's the top priority for Indocam in the near term?
Our clients are mainly institutions. Most of them come from outside Asia. Sixty per cent of the assets we manage are for European clients; 10% for US clients; 10% for Middle East clients; and 20% for Asian, including Japanese, clients.
We now want to add to our existing business the servicing of distributors of mutual funds in Asia. And we see the mutual fund business as being closely linked to the way the pension market is developing in Asia. So our priority at this stage is to consolidate our business through the distribution of our global products in the region.
