"We do not see an integrated managed account (IMA) as just a single product. Through an IMA, we will raise individual funds, supply them to small and midsize companies and the venture capital field that need capital, and create a virtuous cycle in which the funds are then managed again in the sales and trading (S&T) institutional sector."
On Dec. 18, President Kim Seong-hwan of Korea Investment & Securities said in an interview with ChosunBiz at the company's headquarters in Yeouido, Seoul, that the first IMA product launch is "the starting point for productive finance to work."
On the day, Korea Investment & Securities became the first domestic securities firm to launch and begin sales of the IMA No. 1 product. The first product released this time is a two-year closed-end structure with a benchmark yield set at 4% per year. Early redemption before maturity is not possible. The minimum subscription is 1 million won and there is no cap on individual investment limits. The sales period runs through the 23rd of this month.
An IMA is a product in which a large securities firm invests 70% or more of client funds in corporate finance assets such as corporate bonds and acquisition finance loans to generate revenue. If held to maturity, the securities firm pays back the principal. It is a performance-linked product whose return varies with management results, and investors receive the contracted principal and proceeds.
Earlier, the Financial Services Commission (FSC) last month designated Korea Investment & Securities, with more than 8 trillion won in equity capital, as an IMA operator. The IMA is a system introduced to expand the supply of venture capital to small, midsize, and venture companies, and a securities firm must invest an amount equivalent to 25% of assets under management in venture capital. It can raise funds up to 300% of its equity capital.
The following is a Q&A with President Kim.
- Who is the main target for the product
It will be an attractive investment alternative for clients seeking stable returns. Individual investors have been at a disadvantage compared to institutional investors due to issues such as access to information, but this product effectively guarantees principal by the securities firm while offering higher yields than bank deposits, making it well-suited for individual investors who are proactive about growing their assets.
- Seventy percent of IMA funds must be deployed in corporate finance. What criteria do you use to select investment targets?
We will form an IMA investment review committee to comprehensively examine sector-by-sector investment amounts and horizons, risk levels, and expected revenue. Afterward, we plan to decide on investment targets through consultations among committee members.
- Do you plan to pay interim dividends?
We are fully considering interim dividends and the like. However, if the principal is returned after dividends are paid and dividend income tax is imposed, investors' expected returns may decline, so we plan to manage the product in the safest possible way for clients. Accordingly, products included within the IMA will decide on interim dividends depending on the nature of the managed assets.
- What about concerns that paying all interest at maturity could make it subject to comprehensive financial income taxation?
Of course it could be subject to comprehensive taxation. That does not mean it is a product only for high-net-worth individuals whose comprehensive income tax is already fixed. The IMA is a public offering product available from as little as 1 million won, making it fully usable for investors whose financial income is not large or for younger clients.
- Tell us about the No. 1 product and follow-up launch plans
The No. 1 product is designed to manage domestic acquisition finance and corporate loans as core assets and to enhance profitability through high-yield assets such as BDCs. We set the maturities of major assets at around two years to pursue market-average returns, while focusing on giving clients the first impression of an "stable product."
Afterward, we plan to gradually introduce medium- to long-term IMA products aimed at clients with aggressive risk appetites. We are considering products that set the maturities of major assets at around five years to tolerate some volatility while pursuing returns above the market average.
- What is your future vision for the IMA business?
The IMA business will be a key pillar for Korea Investment & Securities to leap into a mega investment bank (IB). Through IMAs, we will manage long-term funds and expand the scale of operations in corporate loans, corporate bonds, and venture capital investments. As the business grows, our influence in global markets will expand, and opportunities to compete in various large deals will also emerge. Ultimately, the IMA will be the foundation for essential "size expansion" to grow into a global IB.