In an effort to downsize its non-profitable units,
The Goldman Sachs Group, Inc.
) announced its intention to quit the South Korean
asset-management division. The U.S. banking giant took this
decision after incurring loss from this division for roughly five
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The unit is expected to be closed by next six months. Goldman
will consider offers from other asset managers to take over some
of the seven funds managed by this division.
Goldman's foray into the South Korean market dates back to 2007,
when the company acquired a joint venture between Macquarie and
IMM Asset Management for a sum of Won160 billion ($147 million).
The South Korean asset-management division presently has 40
employees. While the fate of majority of the staff still hangs in
the balance, the company spokesperson stated that some will be
offered positions in Singapore and others in Korea.
Despite possessing a flourishing investment banking business in
South Korea, Goldman did not achieve a strong foothold in the
asset management market of the country. The primary reason behind
this is the huge competition on fees and the dominance of the
Further, most of the overseas players struggle to combat the
local asset managers in South Korea, owing to their strategy of
relying more on the off-shore products rather than local equity
Management at Goldman Sachs Asset Management division felt that
the local Korean asset management business has not lived up to
its expectations. However, Goldman will continue to invest in
South Korea through its overseas funds management division.
Other than Goldman, asset management divisions of
Deutsche Bank AG
) are also struggling in the competitive South Korean market.
With Goldman enduring crisis since the financial meltdown, the
overhauling measures are aimed at developing its core businesses
and downsizing the troubled units. Further, lower returns and
stringent regulatory challenges proved to be headwinds. The
company has been trimming down the less-profitable units over the
past year and aims to refocus on building its wealth management
division to meet such challenges.
Goldman currently retains a Zacks #2 Rank, which translates into
a short-term Buy rating. Further, we believe that prudent
rightsizing of businesses can lead to improved efficiency and
reinforce its competitive edge, leading to upward estimate
revisions. These factors may lead to an improvement in its Zacks