Korea Investment’s successful settlement under the CMCA
SINCE the Capital Markets Consolidation Act (CMCA) was activated last February with derived expectations in the financial market, such as an increasing supply of newly structured securities and derivatives, and diversified opportunities to make investment profit through hedge funds, Korea Investment Co., Ltd also has been participating in the huge flow of financial firms expanding their business areas. Although the CMCA was relatively controversial, especially in the respect of structural change in the financial market by oligopoly of a few securities firm and increasing risk for individual investors, Korea Investment seems to be very confidential about the influences of the new law since the company has already established an Investment Banking business model by virtue of various experiences in the market and a stable profit-making structure. The firm was actually ready to be an active beneficiary of the new law by strengthening the research field and qualifying the risk management capability.
The main theme of the firm’s strategy in the era of the new law consists of “customer service” and “maximization of Investment Banking business capacity.” “Private Banking” service, a customized asset management system of Korea Investment, and its “Bankis” service, an online equity trading service provided for a low fee, are the most qualified customer-centered services that the firm offers. They also manage the assets of customers comprehensively in order to augment volume and profit as the basis of the individual record of their investing propensity through diversified channels for providing customized services, such as an online-only fund product.
For instance, the company launched ‘Asset Distribution Fund’ last May under cooperation with major asset management corporations, such as Korea Investment Trust Management, KTB Asset Management and GS Asset Management for investors who were not clearly directed to deal with their money. The fund consists of ‘traditional distribution fund,’ by Korea Investment Trust Management, a fund to maximize profit margin in the long term by accumulating dividend profits, and ‘dividend distribution fund,’ by KTB Asset Management and GS Asset Management, a fund managed with the remaining principle after a 7% dividend profit is deducted from the initial principle when the 7% target profit is achieved.
In particular, the ‘dividend distribution fund’ by KTB Asset Management accomplished over 58 billion won in sales revenue and the 7% target ratio for two months since the fund was launched in May. In addition, ‘Happy 10 Wrap,’ a wrap account product of Korea Investment launched this April, is being managed under description that the principle and APR yielded profit are begotten to customers and their account automatically closed when the 10% goal is exhausted, has closed total 21 accounts as of July 28. The firm’s second strategy, the IB business, is related with overseas market development and the diversification of its investment portfolio.
They are planning to construct a ‘financial silk road’ by participating in the hedge fund market, establishing cooperative corporations with Vietnamese equity firms, taking part in the development of three northeastern provinces in China, issuing an Islam bond (Sukuk), and building a financial network to cover Mongolia, China, Vietnam, Indonesia, India, and Kazakhstan, in order to proliferate sources of profit and bolster the development of new business both domestically and overseas.
Meanwhile, the firm is developing the IB field by inventing multi-faceted products, such as various swap trading, structuring trading and, raw material derivatives, as well as building an infrastructure for CRS/IRS booking management and FICC-relating experiences. Additionally, traditional cashcows of the firm, such as Initial Public Offering, bond buybacks, consulting real estate finance, OTC (over the counter) derivatives, and ELS/ELW will be continuously focused on by the company.
In this respect, Korea Investment has announced that the company is to provide a new trading service for commodity futures based on the interest rate, currency, gold, and lean hog as of November 2, 2009. The minimum reserved principle to run the account is 15 million won and the fee per each contract is 3,000 won for the interest rate futures, the gold futures, and the lean hog futures, and 600 won for the currency futures.
“Although the new law is enacted for development of the financial market, we are not seeing only the bright side of the improving economic conditions. Therefore, ‘back to basic’ is our main philosophy to be a leading financial service provider in the world,” said Yu Sang-ho, president of Korea Investment, Co. Ltd.