Korean Mutual Fund giant Mirae which began its journey in India in late 2007 is slowly gaining acceptance in the Indian market. In his first ever interview with India media, Jisang Yoo who took over the reins of the company as its CEO recently shares his growth plans for Mirae in a two-part series with Cafemutual.
Mirae launched its first fund in 2008 when the financial crisis hit the industry. What were your learnings and how has the journey been for Mirae so far?
We just completed five years of operations. In April next year, our first fund Mirae Asset India Opportunities Fund will complete five years. We have to agree that we have been facing a lot of challenges. I don’t think that these challenges were faced only by us. In the last five years, the global mutual fund industry also faced similar challenges. We have been trying to overcome these challenges and trying to build a strong business in India. We have good performing funds now. The market players have already recognized us. Our learning was that it is not easy to go to other markets and build a base in a short span of time.
Mirae was founded when the Asian financial crisis hit in 1997. We have experience on how to overcome such crisis. We believe that our strength should be fund performance. That was the reason for our success in Korea and Asia Pacific markets. In India too, our first priority is to maintain our performance.
You have worked in markets like Brazil and Seoul. Mirae launched its asset management business in Brazil and USA around the same time you started in India. How do you see the Indian mutual fund industry vis-à-vis these markets?
The Brazilian mutual fund market is ten times bigger than India. It is interesting to see how they grew like that. It ranks number first in the emerging markets. Brazil’s population is 20 crore which is one sixth of India. Their GDP size is less than India. Brazil’s market is known for inflation and high interest rates which is similar to the Indian market. Brazil has a large fixed income market. Institutional investors account for more than 30% of Brazil’s assets under management. They have a world class HNI segment. Also, we invested a lot of money in real estate in Brazil which has given stability to our business there.
India’s GDP is big and there are many HNIs now. Institutional segment is not yet developed in India which will grow over time.
Do you find it a challenge to grow your business in India without a local partner? Was it a conscious decision to go solo in India?
Yes, we chose to start our business independently. With a partner, our growth would have been faster but there has to be compatibility. On the other hand, it takes time to grow with your own business strategy. We are following this route but that doesn’t mean that we are not open to any joint venture. Globally we follow this strategy of launching business independently. It was only in 2011 that we purchased four mutual fund companies based in Taiwan, Canada and Australia and are in the process of acquiring a second mutual fund in Taiwan. The Chinese government allows buying only 49% stake in the local business. So we have a joint venture in China with Huachen Trust and Tiantu Capital Co.
Are you open to growing inorganically in India?
We see a good potential for mutual fund market in India in the long term. In general we are open to inorganic growth but it’s not that we are actively scouting for a partner at this juncture.
You have launched some international funds. Do you find it difficult to sell these funds in India?
We have to understand the Indian investor’s mindset. In Japan, more than one third of assets are invested overseas. Japanese investors are investing more in foreign bonds than their domestic bonds. In Korea too, a significant portion of assets is invested overseas. Compared to these markets, Indian investor’s mindset is more focused on Indian markets. The possible reason is that Indian growth rate is higher than other markets. When mutual fund players in other countries went overseas their domestic markets were already mature. They try to find other opportunities in India. In India we are still in the growing phase.
Will Indian mutual funds continue to outperform their benchmarks as the Indian markets develop?
Even though growth in other countries stopped they outperformed India. China’s economy was growing fastest in the last ten years but its market is not doing so well. Economy’s growth is not so much related to the mutual fund market. Corporate earnings play a bigger role in financial markets. India’s fixed income market should grow further. The institutional investors business is not mature here.
What is your roadmap for Mirae for the next three years?
We are keen to find out opportunities in QFI route because we have a good distribution system in our Asia Pacific market. If we launch an India Fund and introduce it to other markets it will be very attractive for them. QFI will be one of our major focus areas for the next three years. We need some more clarification on QFI regulations. Seven to eight percent returns from fixed income funds is very attractive for people in Japan, Korea and Hong Kong. We have started to get some mandates for QFI route. Mirae Asset India Opportunities and Mirae Asset Emerging Bluechip Fund will be the base for our business plans in India. Mirae Asset Emerging Bluechip Fund completes three years next year. We are looking at increasing our size of the domestic business.
