April 26, 2024

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[THE INVESTOR] An attempt to oust Macquarie Korea Asset Management from operating Macquarie Korea Infrastructure Fund, the only listed infrastructure fund in Korea, has failed.

On Sept.19, the fund’s shareholders voted to retain Macquarie Korea Asset Management -- the Korean unit of the Australian financial group -- as fund manager. The failed ouster has been referred to as the first instance of shareholder activism by a Korean company targeting an overseas firm.

Among the shareholders who held 74 percent stake -- or 258 million shares -- who participated in the voting, only 31.1 percent of the total shares, or 42 percent of the participants, voted for dismissal of Macquarie Korea, failing to meet the 50 percent threshold. 

In July, Platform Partners Asset Management, a local asset management firm with a 4.1 percent stake in the fund, demanded Macquarie Korea to lower its management fees, saying that they are excessive and hurt shareholder value. During 2006 to 2017, Macquarie Korea took home a total of 535.3 billion won (US$478 million) as management and performance fees.

Macquarie Korea refused, after which Platform called for a shareholders meeting to replace Macquarie with KORAMCO REITs Management and Trust. KORAMCO promised to charge fees that are about one-eighth of Macquarie’s, without any performance premiums.

Industry sources said that some of the major institutional investors such as Government Employees Pension and Teachers’ Pension as well as top three largest shareholders played an important role in the voting results. Industry sources said that the institutional investors agreed that Macquarie does charge a high compensation but they had doubts about KORAMCO’s ability to run the 3 trillion won fund.

Three financial units of Hanwha Group including Hanwha Life Insurance and Hanwha General Insurance, which altogether hold 6.13 percent, and Shinyoung Asset Management with a 5.77 percent stake, also reportedly voted against Platform’s initiatives.

“I believe the decision made by shareholders is a result based on their trust in our performance for the last 16 years,” Paik Chul-hum, representative director of Macquarie Korea Asset Management. “We will do our best to return the best profits to investors and we will listen carefully to our shareholders.”

Platform accepted the results, but warned that they would carry out various shareholder activism that could bring about positive changes in the capital market. 

“We want to emphasize that 31 percent of the total shareholders voted for the removal of the asset management company, which is quite a drastic agenda. Macquarie should respond to requests from the market as five domestic and overseas proxy advisory services also supported the decrease of incentives and bonus,” Platform said in a statement on Sept. 19.

Glass Lewis, Korea Corporate Governance Service and Sustinvest said switching to a new asset management company would raise shareholder value while Institutional Shareholder Service and Daishin Corporate Governance Research Institute opposed it, saying that Macquarie’s management capability is better than that of KORAMCO.

Launched in 2002 and listed in 2006, Macquarie Korea Infrastructure Fund has recorded an annual return on investment of 9.4 percent and a dividend yield of 7.2 percent since 2006.

“We will continue to carry out shareholder activism that could bring about possible changes in the capital market,” Platform warned.

By Park Ga-young (gypark@heraldcorp.com)