Korea’s $600b pension fund NPS set to be more active shareholder

The logo of National Pension Service (NPS) is seen at its branch office in Seoul, South Korea, November 4, 2016. REUTERS/Kim Hong-Ji/File Photo

South Korea’s biggest pension fund may be set to make its voice heard at dozens of companies including such heavyweights as Samsung Electronics Co.

National Pension Service, which manages 723 trillion won ($610 billion), has changed its officially listed purpose for holding shares in 56 companies to “general investing” from “non-engagement investing,” according to data from regulatory filings compiled by Bloomberg.

The changes come after Korean regulators relaxed rules last September to make it easier for public pension funds to exercise shareholder rights more actively. It also follows investor calls for Korean authorities to take steps to prevent listed companies from treating minority shareholders unfairly.

The NPS, the largest institutional investor in the nation’s $1.4 trillion stock market, holds a 5% or more stake in about 300 listed companies, according to Bloomberg-compiled data. In addition to Samsung, companies affected by the holding purpose changes so far include steelmaker Posco, Korean Air Lines Co., Namyang Dairy Products Co. and Celltrion Inc., a major biosimilar maker.

“General investing” connotes a less active level than “the purpose of engagement,” according to the Financial Services Commission, the nation’s top financial policymaker. As such, the NPS will be limited to contributing to decisions on relatively minor issues such as executive salaries and dividend payouts, as opposed to larger issues including dismissal of executives.

For general-investing purposes, NPS will be allowed to file fewer regulatory filings than before on changes in stake-holding, according to the FSC. And that will be an unpredictable risk for companies, Kim Jang-Won, an analyst at IBK Securities Co., said.

“Up until now, Korean companies have been able to check NPS’s portfolio adjustments,” Kim said. “But from now on, they will not know NPS’s portfolios in detail, and one day, they may be surprised by important changes in NPS’s stake holdings.”

Not everyone sees the move as a step in the right direction. An association of Korean businessmen issued a statement in October that the NPS’s fund management committee lacks independence and expertise in governance issues, as the panel is controlled by the health ministry.

“While some Koreans say it’s a very meaningful step to boost shareholder rights, others say that it is actually a socialist move” for the government to exert control over companies by using the pension fund, said Chung Chang-Won, an analyst at Nomura International Hong Kong Ltd. “But it is true that South Korea has been lagging far behind the global standard for corporate governance.”

Bloomberg

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.