President Jeon Young-muk of Samsung Asset Management Co.

Samsung Asset Management Co. has been at work writing a new history of the ETF market, with Smart Beta at the forefront of its operation.
The company, which dominates with a 50 percent share of the ETF market, has been getting ready to continue to lead the 3rd generation of the market with smart (or enhanced) beta, following the domination of the 1st generation of the market, largely made of bonds and stocks and the 2nd generation made of leverage and inverse.
A third investment approach, known as “smart” (or “enhanced”) beta, has become more popular recently. Suppose that you could follow quantitative rules that allowed you to weed out the bad apples, say, the countries likely to perform badly and thus have low stock returns over time. If you weed out most of the bad and the ugly, you end up picking more of the good apples and do better than average.
To keep costs low, smart beta strategies need to be passive. Thus, adherence to specific rules replaces an expensive manager in choosing the good apples and avoiding the bad and ugly ones. For example, my economic research firm has a quantitative model, updated every three months, that ranks 174 countries on more than 200 economic, financial, political, and other factors to derive a measure or score of these countries’ medium-term attractiveness to investors.
This approach provides strong signals concerning which countries will perform poorly or experience crises and which will achieve superior economic and financial results. Samsung AM announced that it will introduce smart beta products through its factor investing strategy to lead the new growth of the financial investment market in Korea.
Smart Beta indexes capture exposure to market segments and risk factor premia in a transparent, rules-based manner. However, some argue that smart beta may not be the most efficient way to access these return drivers. Factor investing is one of the more popular predecessors of smart beta and has benefited from the recent buzz and new-found interest in risk premia.
South Korea’s Samsung Active Asset Management Co, a wholly-owned subsidiary of Samsung Asset Management (Samsung AM), is merging with the local unit of Franklin Templeton Investments (Franklin Templeton) to create a joint venture to expand their product offerings and boost their competitiveness in the South Korean market.
The merger with Franklin Templeton Investment Trust Management Co is subject to regulatory approval, and is expected to be completed in the second half of 2018, according to a joint statement from Samsung AM and Franklin Templeton.
The merged entity will be known as Samsung Franklin Templeton Asset Management Co.
“The new JV will be under joint management, with equal representatives from the two parties, and is expected to strengthen the range of product offerings and competitiveness of the merged groups within the Korean asset management industry,” the statement says.
It adds that the JV will focus on large-cap growth and small- and mid-cap equity strategies, and that it will benefit from “access to Franklin Templeton’s global active management and research capabilities and additional services including guidance for institutional investors.”
Samsung Active Asset Management and Franklin Templeton Investment Trust Management Co each currently have approximately 6 trillion won in assets under management.

A model holds an ad for Samsung AM’s Samsung EMP Korea Alpha Fund.(Photos: Samsung AM)