South Korean auto giant Hyundai Motor Group is launching an asset management subsidiary, Hyundai Alternative.

According to industry sources on Wednesday, Hyundai Card and Hyundai Commercial — respectively the group’s consumer and commercial financing units — have contributed a combined 3 billion won ($2.06 million) for the establishment of Hyundai Alternative.

A recent Hyundai Card disclosure revealed that on Dec. 26, the card issuer acquired a 51 percent stake in the asset manager, amounting to 306,000 shares for 1.53 billion won. Reports indicate that Hyundai Commercial acquired the remaining 49 percent.

Hyundai Alternative is still in the process of establishing its corporate entity and has not yet been classified as an affiliate of Hyundai Group, according to Hyundai Card's disclosure.

Last month, the local regulatory body, the Financial Services Commission, approved both companies' acquisition of stakes in Hyundai Alternative.

While officials from Hyundai Card and Hyundai Commercial have declined to comment further, Hyundai Alternative appears ready to begin operations soon.

The industry anticipates that the new asset manager will oversee the assets of Hyundai affiliates, creating synergies with the group's other financial units. Despite operating four financial affiliates — Hyundai Card, Hyundai Commercial, Hyundai Capital and Hyundai Motor Securities — the group has relied on external management of surplus funds until now.

As of the third quarter of last year, Hyundai's consolidated retained earnings available for investment totaled 95 trillion won.

As suggested by its name, Hyundai Alternative is expected to focus on alternative investments, such as real estate and non-performing loans, rather than traditional securities like stocks and bonds.

Lee Yong-gyu, an expert in the field, will lead Hyundai Alternative as its first CEO, according to reports. Lee, who joined Hyundai Commercial as an executive director in November, previously served as deputy head and managing director of the funding and financial group at Mastern Investment Management. Holding a master’s degree in real estate from Cornell University, Lee’s career includes real estate and property development financing at construction companies and financial instituitions.

By Choi Ji-won (jwc@heraldcorp.com)