Local subsidiaries of securities firms that have established a base in New York, a global financial hub, are leveraging the elevated status of the K-capital market to expand their business scope. While the goals of the major securities firms' New York subsidiaries each differed, they shared a common purpose: "to provide Korean clients with better products and services using know-how acquired locally."
The New York subsidiaries of securities firms are opening doors for Korean retail investors to invest in U.S. private companies and entering the local structured finance market to build expertise. This is an attempt to diversify the revenue sources of the local subsidiaries while also broadening the business scope of the parent securities firms themselves.
The New York subsidiaries of NH Investment & Securities, Korea Investment & Securities, and Kiwoom Securities, met in Manhattan, New York, from the 14th to the 17th, were each preparing to expand their business areas as they entered a "new leap period." The NH Investment & Securities New York subsidiary, established in 1992, has set a plan to increase the contribution of IB (investment banking) revenue to 50% in the medium to long term.
The NH Investment & Securities New York subsidiary is challenging itself with a new business—direct investment in U.S. companies—beyond its "traditional business" of stock brokerage. On the 9th, it partnered with U.S. investment banking firm PEAK6 to cooperate on local capital market infrastructure and investments in venture capital (VC) and fintech companies.
Jin Sang-won, head of the NH Investment & Securities New York subsidiary, explained, "As seen in cases such as SpaceX, which listed this year, and Anthropic, which is scheduled to list, investor interest in U.S. private companies is enormous." He added, "If the New York subsidiary directly invests in promising companies, it can provide more accurate information to domestic wealth management (WM) clients interested in these opportunities." It is expected that by having the New York subsidiary, as an investor, directly review and convey the latest financial statements, due diligence reports, etc., the effect of reducing information asymmetry will be achieved.
In fact, new companies and distribution platforms are emerging in the U.S. investment market to broker private stocks for retail investors. The NH Investment & Securities New York subsidiary is also considering investments in AI technology firms and fintech companies, reflecting demand for investing in pre-IPO (initial public offering) companies. Head Jin stated, "We plan to focus on increasing access to investments in fintech and AI companies that are changing the financial landscape and making direct strategic investments." He added, "We will collaborate with local AI financial infrastructure firms such as LinqAlpha to discover growth-oriented deals."
The firm also plans to create a "New York success story" in real estate and infrastructure finance, which is considered a strength of NH Investment & Securities domestically. It is considering a method where the New York subsidiary invests in real estate funds as a limited partner (LP). Head Jin said, "To provide better solutions including private stocks and alternative assets, our goal is to enhance proprietary investment (PI) capabilities and strengthen headquarters WM client services based on this." He added, "We will transform into an investment platform for the Americas region that discovers and invests in quality U.S. assets."
KIS US, the New York IB subsidiary of Korea Investment & Securities, has stepped into the structured finance market. Unlike other securities firms' New York subsidiaries, KIS US is a specialized IB entity that does not directly broker stock transactions. Through a thorough localization strategy, it has achieved results in acquisition financing, generating approximately 18.8 billion won in net profit for the current period through August last year.
However, the environment in the acquisition financing market is not favorable this year. Concerns that AI (artificial intelligence) will shrink the SW (software) industry led to a decrease in mergers and acquisitions, and as transactions involving the extension of existing loans and contracts increased, opportunities for KIS US narrowed.
Amid this, an opportunity to enter the structured finance market opened up as regulations on the banking industry within the U.S. tightened. Woo In-gwang, head of KIS US, said, "ABF (asset-backed finance) is a bank-centric market, but due to strengthened regulations, it has become difficult for banks to structure and hold loan receivables." He added, "We entered the ABF business by purchasing banks' loan receivables and structuring and productizing them into forms suitable for customer investment, such as RMBS (residential mortgage-backed securities)."
According to global investment firm KKR, the size of the U.S. private ABF market increased from 706.6 trillion won in 2022 to 829 trillion won in 2024, and is projected to grow to 1 quadrillion 464 trillion won by 2027.
KIS US has established a joint venture, CAP, with global alternative asset manager Canyon Partners and Japan's Dai-ichi Life, among others, to purchase high-quality loan receivables. It is also considering structuring these into products such as MBS (mortgage-backed securities) for sale and management.
The ultimate goal of KIS US is to accumulate expertise and experience in the U.S. capital market, where IB and structured finance are most developed, to meet the diverse needs of Korea Investment Securities clients. Head Woo said, "In 20 to 30 years, our country's capital scale will grow larger, and the products customers want will become more diverse." He added, "While competing with local U.S. financial firms, we will build expertise in IB and structured finance, source direct deals, and respond to the diverse investment needs of Korean clients."
There are also securities firms newly entering traditional businesses. Kiwoom Securities is in the final stages of inspection, aiming to launch a direct U.S. stock brokerage service by October.
Kiwoom Securities acquired a securities license in June last year by acquiring a local securities firm established in the 1990s. As the No. 1 domestic retail stock trading firm, Kiwoom Securities is establishing a New York subsidiary to innovate overseas stock services in the medium to long term. Lee Yun-gu, head of the Kiwoom Securities New York subsidiary, said, "For example, fractional stock trading service has become possible, but if orders are processed through other U.S. securities firms, the introduction of such new services may be delayed." He added, "Having a local subsidiary allows us to immediately upgrade systems according to the situation and launch new services."
With the launch of services by the Kiwoom Securities New York subsidiary, competition among domestic securities firms is expected to become more intense. As each securities firm internalizes U.S. stock brokerage, healthy competition is anticipated that will increase benefits and convenience for retail investors.
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