Mirae Asset enters prime brokerage business

Global Custodian speaks to Robert Akeson, head of equity prime brokerage for Mirae Asset Securities (USA), on its recent move into the US prime brokerage market.
By Joe Parsons

Global Custodian: Can you tell us about Mirae?

Robert Akeson: Mirae Asset Financial Group is South Korea’s leading non-bank financial services firm.  As of 30 June, 2018, the group’s asset management businesses had approximately $391 billion of total assets under management. Its various broker-dealer subsidiaries and affiliates had approximately $7.6 billion in equity capital.  We operate in 15 country markets on five continents.

GC: What has prompted the move into prime brokerage?

RA: In recent years, Mirae Asset Financial Group has made several important launches and acquisitions geared toward the investment management industry, including increasing the pace of allocations to hedge funds. In late 2016, $250 million of permanent capital was placed with Mirae Asset Securities (USA), with additional infusions likely as the business grows. With this capital, we entered the prime brokerage, securities lending, repo, correspondent clearing, agency execution, corporate access and foreign research distribution businesses in the US. Thus far, we have accumulated $45 billion in financing balances and work with nearly 150 counterparties, hedge funds and broker-dealers. The firm is hopeful that the prime brokerage business can assist in the asset allocation efforts by making referrals.

GC: Which sectors of the hedge fund market do you anticipate seeing the greatest benefit from working with Mirae?

RA: Hedge fund managers that are looking for customised service strategy and special attention from a well-capitalised prime broker will be well served by Mirae: we have no Client Services “800 numbers” and instead rely on a personal approach to client service, at the same time we sustain considerable capacity. All this translates, into highly favourable rates for our target clientele.

We are targeting emerging and small hedge managers who operate long/short, multi-strategy and certain fixed income strategies. This sector of the hedge fund market has been especially overlooked and underserved by the bulge bracket prime brokers.

GC: What is it that gives Mirae Asset Securities an advantage in this competitive arena?

RA: Our competitive advantage stems from the financial strength and reach of our parent, and the collective experience and knowledge of our prime brokerage Team.  Our goal is to build a leading global boutique built around high-touch servicing and customisation, while leveraging the vast resources of the Mirae Family of affiliates.

Also, since we do not roll-up to a bank holding company, Basel III and many of the features of Dodd-Frank do not directly apply to us. As a result, we have more flexibility in how we can use our balance sheet. With this flexibility, we are well positioned to service emerging and smaller hedge fund managers. We think that these managers are being virtually squeezed out of the public markets by the larger prime brokers.

In addition, we are reviewing how best to enter the asset allocation business with hedge funds in the US. Mirae is no stranger to investing in alternatives. In recent years, we have annually placed approximately $1.5 billion with P/E managers. On the hedge fund side, the firm has placed nearly $400 million in certain feeder structures in Korea and $130 million in hedge funds through fund of funds in the US. Over-time Mirae hopes to place $1 billion with hedge fund managers that they have gotten to know.

GC: How does technology make a difference in winning and retaining clients?

RA: Technology ties all our business components together. Mirae’s technology offering helps hedge fund managers mitigate risk across their businesses.

Our lead technology partner is FIS, a $30 billion market cap public company and leader in the information services arena. The FIS platform automates and streamlines critical operational tasks into a single platform, with solutions for trading, securities finance, compliance, risk, middle- and back-office services, corporate actions, tax.  This facilitates operational efficiency and reduces risk—especially important for emerging and small hedge fund managers.

We also partner with PortfolioShop for their solutions related to portfolio management software and solutions systems. Our partnership offers hedge fund managers seamless, straight-through processing of trading information, regardless of counterparty. Easy to navigate and with a wide selection of daily updated on-demand reports are available to Mirae clients for shadow accounting, performance measurement and client reporting.