Aiming to turn KTB into a niche player

This is the sixth in a series of articles on the Korean asset management industry. - Ed.





By Kim Jung-min



Guus Hiddink, the former Dutch coach of the Korea`s national soccer team wasn`t a good player but he was regarded as a great commander of the team. Likewise, being a star fund manger doesn`t necessarily guarantee the success of a chief executive officer at an asset management company.

Chang In-whan, chief executive officer of KTB Asset Management Co. can vouch for that.

Among the first generation of fund managers in Korea, his successful career as a professional fund manager "has been both a strength and weakness as a chief executive officer at KTB," said Chang.

He probably knows better about the industry than fellow fund managers, which makes it easier to run the business. But sometimes, he knows too well to resist the temptation of making every single decision which can be made by working-level fund managers.

"My strong belief is that pride goes before destruction and shame comes after," he said. Chang still holds his title as fund manager as well as chief executive officer on his business cards but tries to entrust everyday investment decisions to his fund managers.

As a senior fund manager, he tries to respect other fund managers as fellow colleagues. Most KTB fund mangers are founding members. "The low job turnover certainly helps us achieve our goal," he said. KTB aims to generate "stable and consistent profits" from its investments.

In stock-type funds, KTB ranks among top performers and his company has been a market leader in alternative investments including property funds and mezzanine investments, he said.

Mezzanine investment, a new investment vehicle that shares the characteristics of both debt and equity financing, includes a loan to the borrower, in addition to borrowers` issuance of equity in the form of warrants, common stock, preferred stock, or some other equity investment.

The asset manager operates the largest number of property funds and Chang expects KTB to be selected as an official partner to operate the property division of the national pension funds.

Many investors may not be familiar with the concept of `asset securitization,` "but Koreans have a strong preference for property as an investment vehicle," he said. Real estate funds have many merits not only for individual investors but also for the entire industry. The funds offer tax benefits and apart from dividends and capital gains, the proliferation of funds would reduce the risk for the overall property sector and increase the value of target properties.

In the past, construction firms took all the risks and returns. The notion of property funds is unspecified; investors share the risk which makes the investment less volatile, Chang explains.

KTB is a major player, accounting for 10 percent of the property funds market worth 5 trillion won, excluding funds of funds. The supply is not sufficient as the first round of a restructuring process - that began right after the 1997-98 crisis - is almost at the final stage.

Private equity funds are also one of KTB`s top business portfolios. The asset manager took over a local mutual savings bank based in Busan in April and a duty free shop through its mother company KTB Network Co. The venture capital firm is listed and holds a 99.9 percent stake in KTB Asset Management.

Insightful and analytical skills, plenty of stamina and honesty are vital ingredients to becoming a successful fund manager, said Chang who is also a judo exponent.

A star fund manager may be born with talent for investment, but such talent can be easily wasted without continued efforts to move up the ladder. His knack for remembering statistical numbers should help him excel in the industry.

"In making investment decisions, you shouldn`t look back at what happened in the past. The past is just a reference and you always have to be a future-oriented person," the 47-year-old executive officer said.

He began his professional career at Samsung Life Insurance in 1985. After working for two years at Dongwon Securities - renamed later as Korea Investment & Securities Co. - he achieved stardom as a fund manager right after the financial crisis when the craze of "buying" Korea swept the entire nation. His rapid rise to stardom, however, didn`t fulfill his satisfaction. "My role as a fund manager was limited. I wanted to run a company that would reflect my investment philosophy," said Chang who took over the helm at KTB Asset in 1999 when KTB Network set up an asset management business.

The asset management industry is already overcrowded and Chang forecasts that a capital market consolidation would divide the asset management industry players into two groups. "You could either increase the size of the company or be a niche player and there will be no grey zone," he said.

Chang said he opted to be a niche player and aims to transform his company into a small but solid local player.

He believes that achieving leadership in the local market is the surest way to become a real global player. "Going abroad comes with no guarantee. My goal is to make the best funds in Korea so that global players would like to include our funds into their portfolios," he said.

The Korean stock market is undervalued and many global investors flock to the local market for hefty returns. "If you can`t achieve success here, what`s the point of going abroad?" Chang asks.

Still, KTB has expanded its networks around the world, including ones in Beijing, Tokyo and the Silicon Valley to study international business feasibility.

Chang likes to give lectures on market outlooks and Korea`s capital markets. Preparing lectures could be extra work for him but he enjoys lecturing students and investors but most of all, Chang believes it is an effective marketing tool. "It`s a good opportunity to tell the potential investors about what my business philosophy is. It`s one of the effective ways to gain market trust," he said.

(jungmin@heraldm.com)