What is an Investment Management Company?

Investment management companies are integral to the financial sector, responsible for managing and operating various investment funds. These companies handle substantial private funds, ranging from billions to trillions of Korean Won. Their primary roles include establishing funds, delegating sales to authorized distributors, attracting investors, managing the funds to generate profits, and regularly updating investors on performance while distributing profits. In return, they charge a fee, which is a percentage of the fund’s value. According to the Financial Investment Services and Capital Markets Act, these companies are referred to as collective investment firms. Recently, there has been a significant increase in blockchain-related operations, reflecting the evolving nature of the financial industry.

Historical Evolution

Historically, investment management companies were known as investment trust companies, handling both asset management and product sales. However, a regulatory shift in 1999 mandated the separation of sales and management functions, resulting in the creation of investment trust management companies and investment trust securities companies. Investment trust management companies later rebranded themselves as asset management companies. Many of these companies were established as subsidiaries of securities firms. Even today, it is common for securities firms to own asset management companies. Since the 2010s, the term “investment trust” has gradually been replaced by “asset management” due to its more favorable connotation.

Operational Insights

Asset management companies do not sell products directly; instead, they rely on banks, securities firms, and insurance companies for distribution. Despite regulatory efforts to curb favoritism towards affiliated companies’ products, the practice persists. Unlike foreign banks and securities firms, which often do not engage in direct retail operations in Korea, foreign asset management companies are relatively accessible to individual investors. When choosing a fund, it is crucial to consider the asset management company behind it, as their fund managers, management scale, and performance can vary significantly. Even in a declining market, the performance of different asset management companies can differ greatly, making the choice of company important.

Career Path in Asset Management

Employees in asset management companies, commonly known as fund managers, typically require significant experience and high academic credentials. Their resumes, including their education, career history, and certifications, are often highlighted in investment proposals (IM). Thus, there is no specific academic major for entering this field, with professionals coming from diverse backgrounds such as law, mathematics, and business. The industry is relatively small, and new entrants are rare, but large firms occasionally hire new graduates, often through internships. Preferred qualifications include the Investment Asset Manager certification, while legal, accounting, CFA, and FRM certifications are advantageous. However, less recognized certifications are less valued compared to practical experiences like investment competitions or club activities.

The Rise of Robo-Advisors

A recent development in the industry is the emergence of ‘robo-advisors,’ AI-powered fund managers and asset managers. These robo-advisors are currently being tested by the Financial Supervisory Service, among others, and are showing comparable performance to human managers. They can operate 24/7, which may further reduce job opportunities in an already competitive market. If robo-advisor usage becomes widespread, the industry may see a significant reduction in human workforce, with a preference for hiring individuals with backgrounds in computer science or physics to oversee and fine-tune these AI systems.