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FOF may find it hard to grab distribution marketshare

Cerulli Associates expects that distribution will continue to be dominated by local banks and securities firms

February 24, 2014 12:28 IST | India Infoline News Service
Korea's upcoming online fund supermarket, Fund Online Korea (FOK), is unlikely to have much of an impact on the country's mutual fund distribution landscape in the short term. FOK is slated to be operational by the end of the first quarter.

Cerulli Associates expects that distribution will continue to be dominated by local banks and securities firms. Our research shows 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.

Such a stranglehold will be difficult for FOK to breach. Like it is in the mutual fund space across Asia, distribution is the key to an asset manager's success in Korea.

"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," says Rachel Poh, an analyst with Cerulli.

To add more bite to FOK 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," notes Yoon Ng, Asia research director at Cerulli.

But reviving interest in mutual funds will be a challenge too. "This is a difficult task considering the persisting uncertainties in global markets and the impact that this has on the mutual fund space, but it would be better for authorities in Korea to start as soon as possible," adds Ng.

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