S. Korea fund wants chae­bols to de­ploy cash hoards

New Straits Times - - Business -

SEOUL: A home­grown hedge fund has taken up ac­tivism in South Korea, betting the coun­try’s fam­ily-owned con­glom­er­ates, or chae­bols, would have to de­ploy their cash hoards.

The tim­ing couldn’t be bet­ter af­ter El­liott Man­age­ment Corp’s cam­paign pushed Sam­sung Elec­tron­ics Co to boost its div­i­dend and amid the start of a stew­ard­ship code last De­cem­ber.

Lime As­set Man­age­ment Co, which over­sees US$500 mil­lion (RM2.2 bil­lion), started its first ac­tivist fund in Novem­ber.

The money man­ager is seek­ing to press firms with high cash lev­els to re­turn it to share­hold­ers, ac­cord­ing to Lime chief ex­ec­u­tive officer Jongjun Won.

“This year is the best time to start an ac­tivist fund,” he said.

South Korea has the low­est pay­out ra­tio in the world, and Lime is tar­get­ing firms with ris­ing cash on their bal­ance sheets and fall­ing re­turns, he added.

To­tal net in­come of 766 Kospilisted firms last year was es­ti­mated to be the high­est on record, ac­cord­ing to SK Se­cu­ri­ties Co Ltd.

But re­turn on equity for firms in the bench­mark stood at 7.1 per cent at the end of last year. That’s partly be­cause firms let large amounts of cash sit on their bal­ance sheets.

Sam­sung Elec­tron­ics, for ex­am­ple, had 88.2 tril­lion won (RM342.2 bil­lion) of cash and equiv­a­lents as of the end of last year, ac­cord­ing to its fi­nan­cial state­ments. Bloomberg

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