A rapid climb to the top of Asian finance

Though many were toppled in the United States during the ongoing economic crisis, becoming an investment bank is still the holy grail for many local financial institutions.

Korea Investment Holdings is one of those companies, and its management believes that despite uncertainty over the timing, the economy will get back to normal, and it will just be a matter of time before this dream becomes a reality.

And it may have a shot. Unlike other banking-focused financial groups in Korea, KIH is a holding company with emphasis on its brokerage and asset management businesses, key areas with high growth potential in investment banking.

Its main muscle - Korea Investment and Securities - is one of the top five brokerages in Korea, while its asset management arms, Korea Investment Trust Management and Korea Investment Value Asset Management, are together one of the biggest asset manager groups. Its four other affiliates are also fast-growing players in the areas of mutual savings, alternative investment and investment consulting.

The combined assets of the seven affiliates totaled 2.86 trillion won ($2.33 billion) last year, more than double that recorded four years earlier, 1.38 trillion won.

Last year Korea Investment Holdings was almost the same size in terms of assets as Dongwon Group, once its parent company.

Dongwon, a 40-year-old food giant with 3.02 trillion won in assets as of last year, spun off Dongwon Securities in January 2003. Kim Nam-goo, the eldest son of Dongwon Group chairman Kim Jae-chul, headed the company and still does today, though he’s changed the name twice, to Dongwon Financial Holdings in May 2003 and to Korea Investment Holdings two years later. The latter name change followed Dongwon’s takeover of a brokerage named Korea Investment and Securities and an asset manager, Korea Investment Trust Management, in March 2005.

With an 18-year career at brokerage and asset management business (he joined Dongwon Securities in 1991), Kim Nam-goo is known to have a good grasp of the financial industry. Under his leadership, Korea Investment Holdings has recorded an average of more than 20 percent annual growth since 2003. His other major feat was the establishment of an alternative investment management firm called K-Atlas overseas, a move never tried by any company before.

The firm, founded in Singapore, has invested in hedge funds and private equity funds across the globe in partnership with Atlas Capital Management, a U.S. investment firm. Founded in February of last year, K-Atlas posted more than 70-percent cumulative return rates for 2008, despite the global economic meltdown.

Kim’s ambitious goal is to transform Korea Investment Holdings into Asia’s leading financial institution by 2020 by improving its return on equity to 20 percent and increasing its market cap to 20 trillion won.According to a company statement, “In recent years, Korea Investment Holdings has broken out of a traditional brokerage business model and has tried to provide comprehensive asset management service.

“It plans to develop into an investment bank that can maximize the interests of customers and shareholders.”

Kim Ji-young, an analyst with Hi Investment and Securities, says there is some truth to the firm’s boasts. “The business risks involved with the [holding] company triggered by the economic crisis have been dissolving quickly,” the analyst said. “Its efforts to become a leading investment bank have been the most notable and aggressive among local financial companies,” Kim said. “So if it is reborn with better risk management after the economic crisis, and I think it will be, then the goal it is pursuing is possible to reach.”

Other top executives are also devoted to the goal, according to the company.

Kim Ju-won is the vice president of Korea Investment Holdings. He joined Dongwon Securities in 1985 and became an executive in 2000.

Ryu Sang-ho, president of Korea Investment and Securities, is the mastermind behind the company’s bid to go global. With him at the helm, the brokerage expanded into the United States, Britain, Singapore and Vietnam. He served as vice president of Daewoo Securities and executive managing director of Meritz Securities before joining Korea Investment and Securities in 2002 as vice president.

Chung Chan-hyoung, president of Korea Investment Trust Management, has a varied background. He joined Korea Investment Trust Management in 1981 and has experience in many divisions there including planning, international business and investment banking.

Lee Yong-jae has headed Korea Investment Value Asset Management since 2006. The company posted the best return rate on equity funds among local brokerages in the first half of 2007 and became the first local brokerage to distribute a detailed asset management report to investors.

Baek Yer-hyun, president of Korea Investment Partners, a consulting service arm specializing in small and mid-sized companies, was another Dongwon veteran, joining the group in 1987 before moving to his current company, where he has also served as managing director and executive managing director.

Lee Chun-sik, president of Korea Investment Mutual Saving Bank, previously worked at Dongwon Mutual Saving Bank. He led Korea Investment Mutual Saving Bank to record a 10.7-percent return on equity and 12.4-percent BIS ratio last year - far above the averages for the local mutual savings industry of 2.2 percent and 9.3 percent, respectively.

Kim Seok-heon, president of Cornerstone Equity Partners, a private equity fund investor, served at many overseas companies. Beginning his international business career at LG Chem, Kim built up his expertise at Ernst and Young, ABN Amro, CVC and Paradigm Partners.

Kang Shin-woo, vice president of Korea Investment Trust Management, is another financier with a global mind-set. Formerly a fund manager at Korea Investment Trust Management, Kang has also worked at Templeton and PCA. He came back to Korea Investment Trust Management as a vice president in April of 2005.

Lee Chai-won, vice president of Korea Investment Value Management, is a proponent of value asset management, or the management of assets that are currently low in price but have high future growth potential. Lee started his career at Dongwon Securities in 1988.

By Moon Gwang-lip [joe@joongang.co.kr]