(Pictured: John Brogden)
John Brogden, chief executive of the Financial Services Council, has offered to assist the Korean Government to set up an Australian investment office, as Korea has done in the US and UK, giving those countries an advantage in developing closer relationships.
He also did a neat sales job for Australian fund managers in front of Korea’s big sovereign wealth and pension funds in his speech to the Korea Australia Finance Forum in Seoul last Wednesday.
The speech was a highlight of a delegation of Australian fund managers and advisors, in which two new MOUs were signed and various meetings held, to support the Korea Australia Free Trade Agreement signed last year.
Brogden said it was the development of services and investment which would be of the most long-run benefit to both countries, as their economies moved away from more traditional trade in resources and manufactured goods. Financial services, which already made up the largest sector in Australia with more than 10 per cent of GDP, were underdeveloped in Asia. For instance, Asia had about 60 per cent of the world’s population but only about 13 per cent of funds under management.
Korea, however, has one of the largest professionally managed pools of investment and is well-regulated and developed.
Brogden said: “Australia’s market is as much an opportunity for Korean financial services companies as the Korean market is for Australia. The size of Australia’s superannuation system is already larger than the capitalisation of the Australian Stock Exchange and funds under management will increase three-fold over the next 20 years.
“Australian pension funds are in search of investments for these funds and there is great capacity for Korean financial services companies to provide assistance to achieve this. The Korean economy itself represents an opportunity for Australian investors. However, the greatest barriers to trade in financial services are not technical or legal which are fundamentally dealt with in the FTA. Rather, the barriers that remain relate to culture and relationships…
“One of the few remaining technical issues holding back greater trade in funds management services between Australia and Korea is the absence of a deep market for Australian dollar-won exchange and a consequent lack of currency hedging services.
“Korea has a large sovereign wealth fund, the Korean Investment Corporation, and a large Government operated pension fund, the National Pension Service. For Australian fund managers this is a significant opportunity to provide funds management services. For Korea, the opportunity is to access Australian equities, bonds, infrastructure and other assets directly through Australian.”
Turning to the possibility of a Korean Investment Office, he said: “A lack of information about Australia as an investment destination is holding back growth in trade in financial services between the two countries. The Korean Government has established investment offices in the US and the UK. These offices act to reduce the gap in information available to Korean investors directly through the two government-operated funds. There is no equivalent Korean investment office in Australia. As a result EU and US fund managers have an advantage over Australian fund managers.
“The establishment of a similar office in Australia would have a substantial benefit in providing for direct relationships between the two Korean Government-operated funds and Australian fund managers and in turn facilitate the development of deeper currency hedging services. The FSC would welcome the opportunity to assist the Korean Government in establishing an investment office in Australia…”
The Australian delegates on the mission included senior executives from: Russell Investments; Tyndall Investment Management; La Trobe Financial Services; Legg Mason; CFS Global Asset Management; Schroder Investment Management; Vanguard Australia; APIR Systems; BT Financial Group; K&L Gates; and Morningstar.