Korea’s Mirae focuses on niche ETF business

As part of Mirae’s expansion strategy, the Korea-based firm earlier this month announced the acquisition of US-based ETF provider Global X, which has $10bn of AUM in 52 products selling on the US market.

“In order to become a true global ETF player we wanted to have more solid and bigger platform in the US,” Lee told FSA. “Because the US ETF market is 73% of the global ETF industry, a lot of global investors still look to it for product access and liquidity.”

The purchase will also bring the firm a range of thematic ETFs, in the areas of technology and natural resources, as well as income products and single-country ETFs.

Global X’s biggest ETFs are the Robotics & Artificial Intelligence ETF, with $2.37bn in assets, the Lithium & Battery Tech ETF, $1.12bn, and the income-oriented Superdividend ETF, with $947m in AUM. Other products include the Uranium ETF, the Social Media ETF, funds investing in Greece, Norway, Nigeria and Pakistan, and the S&P 500 Catholic Values ETF.

Mirae plans to use the acquisition to diversify the range of strategies it offers in other markets. Lee said it was too early to talk about concrete steps  it will take to bring Global X strategies to Asia. However, he did say the US firm will gain access to Mirae’s distribution abilities in Asia.

“There are different ways to bring the US ETFs to other markets,” Lee said. “We can consider cross-listing, we can launch a local product based on the same strategy, or we can build ETF-based solutions (managed portfolios) in partnership with an Asian institution, that will use our ETFs.”

It also plans to continue building the Global X US ETF business, which will retain its brand, by leveraging the firm’s Asia expertise.

“We are not positioning ourselves to compete against Blackrock, Vanguard or State Street,” Lee said. “Having a `me too’ product doesn’t really work in this competitive and crowded business. We are building an ETF business that can compete in niche markets.”

The firm may find a strong competitor in Premia Partners, a relatively new ETF-focused asset manager that has an Asia focus and recently inked a pact with US-based Wisdom Tree.

After the acquisition of Global X, Mirae will run 300 products globally, with around $32bn in assets. The purchase makes Korea its second biggest market, in terms of AUM, for the first time:

Data: Mirae Asset, AUM in US dollars, as of 31 December 2017
* as of 23 February 2018

In November 2017, the firm’s Canadian division launched the Horizons Active AI Global Equity ETF, trading under the ticker MIND, which the firm describes as an “investment strategy entirely run by a proprietary and adaptive artificial intelligence system that analyses data and extracts patterns”.

To launch this fund, the firm used the expertise of its staff in Korea. Lee believes cross-border collaboration in product management and distribution is an advantage.

“Our Asian distribution team has become a product specialist for our global flagship products,” Lee said. “They are able to collaborate in each of our six markets to promote these products.”

Another area in which the firm sees opportunities to lead the industry is active ETFs. He said the firm has $3bn in active ETF assets in various markets.

“We don’t really look at ETFs as a passive vs active,” said Lee. “We view ETFs as a mechanism through which you can deliver different investment strategies.”

Mirae Asset Financial Group, founded in 1997 and headquartered in Korea, runs several financial businesses such as asset management, wealth management, investment banking and brokerage services as well as insurance.

With around $20bn of AUM at the end of 2017, Mirae Asset’s global ETF business constitutes around 5% of the group’s business. It operates in six ETF markets: Korea, Australia, Canada, Colombia, Hong Kong and the US.