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| Barings Asset Management Korea Representative John Park / Courtesy of Barings Asset Management Korea |
Barings Korea generates consistent return based on research capability
By Kim Bo-eun
With Korea's economy slowing down in recent years, many foreign financial firms have left the local market.
However, Barings Asset Management, which entered Korea 30 years ago, is continuing its operations here, based on expectations of growth in the asset management business.
"Korea is an important market for Barings," John Park, representative director for Korea, told The Korea Times in a recent phone interview.
"Barings strongly believes that the asset management business in Asia, including Korea, is expected to grow faster than other developed countries or regions globally."
The investment firms' rational is based on the fact that the allocation of assets to financial instruments from real estate has increased and the size of investment by pensions, including the national and private pensions, has also been significantly boosted, he said.
Barings Korea plans to maintain a consistent strategy for its operations here.
According to Park, it is Barings' top priority to build up trust with clients over the long-term on a gradual basis, rather than focusing on short-term business prospects.
"This will help in achieving growth in business revenue and market share," he said.
It was Park's first interview with the media since he was appointed to his position in February. Formerly headed solely by Ike Bae, Barings Korea is now led by Park and Bae under a dual leadership system. Park is in charge of investment management, as he was previously the chief investment officer at the company.
Investment philosophy
Barings Korea provides clients with not only traditional investment instruments including high dividend equities and credit bonds here, but also global alternative investments.
"Barings Korea has managed Korean equities and fixed income with a proven track record based on a disciplined investment process and philosophy," Park said.
Barings received KG Zeroin's Best Dividend Fund and Best Fixed Income Balanced Fund awards for 2020. KG Zeroin is a local fund rating and consulting firm.
Park attributes Barings' successful investments to a consistent philosophy.
"Our investment philosophy is that we can generate excess return consistently over the intermediate to long term, identifying and investing in companies that are underestimated by comparing intrinsic value through rigorous teamwork-based bottom-up fundamental company research," he said.
A challenge is identifying growth momentum in local businesses amid the slowing economy.
"From an investment point of view, it is becoming more challenging for an asset manager to identify the right assets including stocks and bonds to invest in the current low economic growth environment," Park said.
He said Barings is interested in companies that can benefit from technological innovation, which includes IT companies associated with core technologies such as 5G or IoT.
Regardless of sectors or industries, Barings is also interested in companies that can enhance operational efficiencies and core competencies supported by technological innovation, as well as companies that are expanding their market share globally with unique technology, he added.
Barings will continue to find and invest in undervalued stocks whose stock price is lower than the intrinsic value regardless of the economic cycle, Park said.
Picking undervalued stocks is done following a bottom-up approach, which focuses on the analysis of individual stocks and de-emphasizes the significance of macroeconomic and market cycles.
At Barings, the research team looks into 350 top listed local companies on a daily basis and draws up model portfolios.
"We typically reflect 80 percent or more of the model portfolios into the actual portfolio," Park said.
The research team sets a target weight for companies, which illustrates the degree to which portfolios are research-based. This compares to other approaches that allow portfolio managers to make decisions at their own discretion.
Park said Barings has the largest investment team among foreign firms here, and takes pride in its expertise.
Barings ranks sixth in assets under management of Korean equity, among over 300 asset management companies here.
As a U.S.-based global investment firm, Barings is also able to utilize its extensive network in managing assets and operating its business in Korea.
"We regularly hold global meetings and share global investment strategies and investments through various global channels," Park said.
He noted Barings Korea continues to grow based on the belief that "people" are the key element in the asset management business.
"We have a number of long-tenured senior management team members and we have a culture of closely working together and collaborating among various functions such as investment, sales, and operations," he said.
Barings Korea's members have a longer tenure than their peers. There are a number of senior management members with careers of over 15 years, who have led and made important decisions for the firm. Park himself has been with Barings for two decades, joining in 2000.
Investing amid COVID-19 crisis
Such investment strategies also apply under current circumstances, as the economy is afflicted by the spreading coronavirus. Despite ongoing market volatility, Park said Barings will continue to stick to its principles.
"Investment strategies will center on selecting companies that are likely to survive and get more market share based on cash flow and business models. Investments will also be diversified across sectors and industry," he said.
Park said the pandemic will likely shave off growth rates for Korea, and for major economies including the two largest ― the United States and China.
Korea's growth rate could lie in the lower 1 percent level this year, he noted.
"Social distancing will lead to a contraction in domestic demand. Individual consumption and business investment will fall in addition to a drop in exports and foreign visitors."
Park forecast China's growth to lie in the 3 percent to 4 percent range and the U.S. around 1.5 percent.
As for strategies for investors at this point, Park recommends diversifying portfolios and investing in global funds which offer relatively stable risk-adjusted return with lower volatility.
As for the long-term, Park said, "As we expect the size of the pension and annuity markets in Korea to grow substantially in the future and the interest rate is expected to remain very low, we expect to see more diversified demand from investors for products utilizing traditional and alternative assets."
