Financial services find their footing in Korea
With major demographic pressure building, South Korea offers substantial opportunities for Australia's financial services sector
Australia's financial services firms are stepping in to meet demand for higher and more reliable returns on pension and investment funds. Australia's strong funds management capabilities are recognised in Korea as part of the solution, and several Australian funds have attracted large institutional investments.
IFM Investors, an Australian global infrastructure funds management company, opened an office in Seoul in November 2017. In partnership with Samsung Asset Management, it established a USD480 million (AUD632 million) investment fund: the first partnership of its kind between Australian and Korean asset managers.
IFM join Macquarie, ANZ, Millinium Inmark and Pepper Savings Bank as Australian financial services providers with a local presence, further building the strength and competitiveness of Australia's financial services industry.
The size of the investment opportunity is substantial. The value of assets under management by Korea's National Pension Service – the third largest pension fund in the world – is AUD761 billion (2018) and projected to grow to AUD830 billion by 2020. Korean pension funds are increasingly seeking to invest into non-traditional asset classes, including commercial real estate, infrastructure and renewable energy. This is where Australian funds have a competitive edge in the global market.
The fintech sector is forecast to grow by 20 per cent annually until 2020
Korea's enthusiasm for adopting new technologies has fuelled the rise of fintech. Korea has the highest level of smartphone penetration and the fastest mobile broadband services in the world. The non-banking sector is seeking innovative ways to disrupt traditional players by providing, non-traditional solutions for wire transfers, settlements, loans, crowdfunding, authentication and e-payments.
KAFTA unlocks market access
Under the Korea-Australia Free Trade Agreement (KAFTA), Australian financial services providers have gained better market access. From a base of just $4 million in 2012, the value of two-way financial services trade increased to $74 million in 2017.
The Australian Government continues to support the development of Australia's financial services in Korea through establishing the Asia Region Funds Passport initiative. Once implemented, the passport will provide a framework to facilitate the cross border marketing of managed funds across participating economies in the Asia region, including Australia and Korea.
Last year, Austrade arranged a delegation of 20 Korean asset management Chairmen and CEOs, including the President of the Korean Financial Investment Association (KOFIA), to visit Sydney. Accompanied by the Australian Ambassador to Korea, James Choi, the visit promoted partnership opportunities and showcased the strengths of Australia's regulatory environment.
In 2017, a reciprocal visit to Seoul by Australian fund management executives from the Financial Services Council, led by Senator the Hon Mathias Cormann, Minister for Finance, promoted new investment opportunities which will be created by the Asia Region Funds Passport. The bilateral program focused on promoting financial services exports, and included meetings with senior Koreans in government and business.