Korean fund’s governance bet

  • Corporate News
  • Tuesday, 21 Jan 2020

SEOUL: A Seoul hedge fund is making a massive bet that hinges on changes in the chronic issue of South Korea’s corporate governance.

In August, Must Asset Management, a 500 billion-won (US$430mil) long-only hedge fund, said in a filing that it would become more actively engaged with a local builder it has a stake in: Taeyoung Engineering & Construction Co. Then in December, it proposed that the company, which owns several valuable subsidiaries, set up a body to improve governance.

If things stay the way they are, the owner family could decide to spin off Taeyoung E&C’s subsidiaries into independent groups for its family members. That’s a common succession practice that has angered minority shareholders. Both local and foreign investors have called for governance changes. For Must Asset, it’s led to a wager worth about a third of its assets.

“We don’t think we are making an excessive bet,” Kim Doo-yong, the fund’s CEO, said. Must Asset is the second-biggest shareholder in Taeyoung E&C with a 16% stake, after the builder’s chairman.

“If the company accepts our suggestion, we’ll feel appreciated. If they accept it conditionally, we’ll have a discussion and a rigorous negotiation,” Kim said.

Kim’s proposal of setting up a corporate-governance body came after Taeyoung E&C’s chairman sold about 790,000 shares of his stake in Taeyoung Industry Co, a unit of the group, to his sister in December 2018 without disclosing a price. — Bloomberg

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corporate governance , South Korea


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