The upcoming platform called Fund Online Korea (FOK), which is slated to be operational by the end of the first quarter, may find it hard to grab significant distribution market share, the Boston-based research firm said.
Instead Cerulli expects local banks and securities firms to continue to be dominating channels.
Highlighting that nine of Korea’s 10 largest asset managers have an affiliated bank or brokerage in the list of the 10 largest mutual fund distributors, Cerulli said such a stranglehold would be difficult for the online platform to breach.
As it is in the mutual fund space across Asia, distribution is the key to an asset manager’s success in Korea, the paper noted.
“However, with some of the local banks selling as much 70% of their funds from their sister firms, shelf space is severely limited for the 55 asset managers competing in the publicly offered funds space in Korea,” said Rachel Poh, an analyst with Cerulli.
To make the platform successful in the long run, Cerulli believes that its development should come in tandem with initiatives that “rekindle” investors’ appetite for mutual funds.
“Investors in Korea have already shown signs that they are losing faith in mutual funds and have begun to look at investment alternatives,” noted Yoon Ng, Asia research director at Cerulli.
According to Ng, reviving interest in mutual funds would be a challenge too amid the persisting uncertainties in global markets and the resultant impact on the mutual fund space.
“But it would be better for authorities in Korea to start as soon as possible,” Ng added.
