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With the onshore fund market rapidly growing, global asset management funds are likely to accelerate their penetration of the Korean market this year, a report said yesterday.

According to the Korea Securities Research Institute, onshore assets managed by international firms in Korea amounted to 66.29 trillion won ($70 billion) as of June last year, comprising over 25 percent of total onshore funds, which were worth 259.3 trillion won.

Because financial regulations are to be eased with the introduction of the Capital Market Integration Act next year, global funds will try to tap the more open Korean capital market, the report said.

The equity fund market in Korea expanded almost 150 percent to 114.7 trillion won ($121 billion) as of late 2007 from a year earlier, according to data by the Asset Management Association of Korea.

Foreign money managers have been entering the local market either by setting up a wholly-owned management unit or through mergers and acquisitions.

U.S. investment bank JP Morgan Chase & Co. established a 100-percent owned asset management arm in Korea. UBS, the world's largest asset management fund, bought a 51 percent stake in Daehan Investment Trust Management Company from Hana Financial Group last year. ING Group took over 100 percent of shares in Landmark Investment Management last year.

The KSRI report said tax incentives for onshore funds investing in overseas listed securities since June 2007 have been a catalyst in expediting the expansion of foreign asset management funds in the local market.

To compete with global asset management firms, small-scale local asset management companies urgently need to set up effective strategies, the report noted.

"They need strategies like positioning themselves as a small but specialized asset management service provider or searching for new business opportunities," it said.

By Kim Yoon-mi

(yoonmi@heraldm.com)