S. Korea fund wants chaebols to deploy cash hoards
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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