[In-depth interview] Stocks poised to gain in the long run
But such moves are often fraught with pitfalls, and the track record of local financial companies that have taken this route is decidedly poor. Conflicting opinions among team members, faulty approaches in local markets and other unexpected hurdles often combine to sink international joint ventures in the financial industry.
UBS Hana Asset Management Company - a joint venture between Swiss-based UBS Global Asset Management and Hana Financial Group, a Korea-based financial holding company - is one of the few survivors. The parent companies formed the venture in 2007, essentially incorporating Hana’s asset management firm at the time, Daehan Investment & Securities Company, into the new entity.
It hasn’t exactly been smooth sailing, though.
Despite a strong partnership between the parent firms, critics say that the venture is not performing at the same level as Hana’s previous asset management business.
Michael Chin, who officially stepped in as chief executive officer of UBS Hana Asset Management on Jan. 4, hopes to change that by focusing on the complexities and characteristics of the local market instead of employing broader strategies that fit a global client base.
During an interview with the JoongAng Daily last Wednesday at his office in the Hana Daetoo Securities building in Yeouido, western Seoul, Chin talked about his approach to managing the firm and offered some insight into the investing world.
Q. What is your goal as the newly appointed CEO of UBS Hana?
A. My ultimate goal is to get the firm recognized by the local market as a successful financial joint venture. I will uphold the business traditions of Daehan Investment & Securities to make the leap to become the nation’s leading asset management firm.
A total of 65 funds being operated by UBS Hana posted an average investment return of minus 5.32 percent so far this year through February. What led to the negative returns, and how do you plan to improve the performance of these funds this year?
Coming into this year, investments were centered on cash equivalents rather than stocks because of rising uncertainties due to short-term volatility. The market usually shows a temporary drop of 10 to 15 percent when the country gears up to implement strategies to tighten monetary policies.
However, the market is on its way to a recovery in the long term. UBS Hana will therefore change its investment strategies - such as by expanding the ratio of stock investments - when the market recovers to a certain level.
Since the launch of UBS Hana in 2007, Korea’s fund market has shown drastic growth in returns. But UBS Hana’s level of assets under management has stagnated. Industry experts believe that the company has focused too much on stable investment vehicles like bonds and money market funds. How will you boost assets under management?
I plan to upgrade our systems and recruit talented employees. Also, the company will develop sales strategies through the principle of “management by wandering around” [which involves on-site visits to companies in its funds] while enhancing customer service.
Numerous joint ventures and mergers between domestic and overseas financial firms have faltered in recent years. Woori Financial Group and Credit Suisse, for instance, officially unwound their joint venture in the asset management sector. Some industry observers say UBS Hana’s performance is less than stellar as well. What is your response to this criticism?
First, I humbly accept such critical evaluations. We needed a customized approach to the business by adjusting our asset management system to fit into the local market instead of taking a more global view. From now on, we will properly combine UBS Hana’s quality products and take a localized, customized approach.
UBS Hana generated high investment returns last year from its Korea Fund product, which focused its investment in the electromechanics sector last year. Which UBS Hana funds do you think will see momentum this year?
Making investments by employing a theme can be a smart move. However, when volatility and variables exist in the market like they do now, I recommend that investors focus on blue-chip companies instead.
UBS Hana’s Blue-chip Basket or First Class Ace are products that are safe and will have earnings momentum this year, as both of them are invested in blue-chip companies on the Kospi.
Which specific industries should investors keep an eye on this year?
Following last year’s trend, the IT sector will do well again this year. However, it’s unlikely that the auto sector will continue its strong performance from last year.
Green-related industries could also see momentum, but there is a need to clarify what this sector really comprises. For example, can we say Samsung is a company engaged in the green sector, as [its affiliate Samsung SDI] develops rechargeable batteries? We are still unsure of what green-related industries really are.
Based on your experience working with overseas securities firms, how do you think that Korean and foreign investors differ in terms of making investments?
Foreign investors tend to make relative evaluations and go for long-term investments. Korean investors, on the other hand, tend to come up with absolute evaluations, focusing on whether or not they earn money in the short term.
Asset management firms should take such different investment characteristics into account when looking to fulfill investors’ needs. The same is true in business in general. Let’s say a customer hoping to buy an SUV goes to Hyundai Motor’s showroom. A Hyundai worker should not recommend that the customer purchase an Equus, even if it is one of the most expensive and nicest vehicles that the carmaker manufactures. The worker should be aware of the customer’s need, which is an SUV, not a sedan.
What do you think are the most important virtues that fund managers should have and why?
I would have to say modesty and self-control. A modest attitude is a must as a part of offering quality customer service. Also, a good fund manager should know how to control oneself in order to find the right timing for making passive or aggressive investment moves.
By Jung Jae-yoon [firstname.lastname@example.org]