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Business deals

South Korea's Mirae Asset pushes to become global ETF player

Acquisition of US fund provider reflects investment banking ambitions of group

Mirae Asset's building in central Seoul. The group has agreed to acquire Global X Management, a large U.S. provider of exchange-traded funds.

SEOUL -- South Korean financial services provider Mirae Asset Financial Group is expanding its global exchange-traded fund business to boost its name recognition and develop a competitive investment banking arm.

Mirae Asset Global Investments has agreed to acquire Global X Management, a major U.S. ETF provider, for 500 billion won ($460 million), gaining access to the company's U.S. sales network.

The acquisition, Mirae Asset's largest purchase of an ETF manager to date, is expected to be completed in the first half of 2018. It marks a step forward in the company's efforts to become one of the world's top 20 ETF managers.

Global X, established in 2008, had 11 trillion won of assets under management at the end of January. It operates 52 ETFs in four investment categories, including "innovation" and "resources."

The acquisition will boost Mirae Asset's net ETF assets by 50% to over $30 billion.

Mirae Asset's ranking among the world's ETF players will rise to 18 on a net asset basis, according to the company.

Mirae Asset has been aggressively pursuing acquisitions in the ETF business. In 2011, it bought Canada's Horizons ETFs Management (Canada) for about 140 billion won while adding Australia's BetaShares to its group roster.

These moves have given Mirae Asset a presence in Canada, Australia, Hong Kong, India and Colombia.

Mirae Asset Financial Group Chairman Park Hyeon-joo reportedly intends to use the group's expertise and sales network, developed through ETF management and real estate investment, to make it a global investment bank for brokering mergers and acquisitions involving large corporations.

In November last year, the South Korean government designated the country's five leading brokerages, including Mirae Asset Daewoo, as "investment banks" in a push to create a South Korean version of Goldman Sachs.

The government has announced plans to allow the brokerages to use new fundraising methods to invest in promising startups to help them grow into "unicorns," startups valued at over $1 billion.

The government, however, has postponed granting fundraising and investment permits to four of the five brokerages, including Mirae Asset Daewoo, because of compliance problems, including past disciplinary actions by the country's Financial Services Commission.

To build its investment banking future, Mirae Asset needs to improve corporate governance as well as expand its business portfolio, said an observer.

Park built Mirae Asset from scratch. Its core businesses include real estate investment, brokerage and life insurance.

In South Korea, some analysts do not regard financial groups as conglomerates. But the Korea Fair Trade Commission's report on conglomerates published in 2017 lists Mirae Asset Financial Group as the country's 21st largest conglomerate, with assets totaling 8.13 trillion won.

Park founded an investment company in 1997 when South Korea was suffering from a currency crisis and had to be bailed out by the International Monetary Fund.

Amid the financial turmoil, Park led the company's rapid growth, mainly by investing in depressed and undervalued financial assets.

But around 2000 when the South Korean economy nose-dived, Park incurred huge losses from investment funds he himself had set up, according to South Korean media. His funds focused exclusively on South Korean stocks, making them vulnerable to the country's economic woes.

Park learned bitter lessons from the setback, including the importance of investing in overseas business and assets, which Park is now doing aggressively.

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