News Index

Search for news:

Calpers to Invest $100 Million in South Korea Fund

Date: April 17, 2008

The Bloomberg reported that CalPERS, the largest U.S. pension fund, would contribute US$100 million to Lazard’s Korea Corporate Governance Fund sometime during the first half of 2008. This investment plan was revealed by Henry Jones, a member of the Board of Administration at the California Public Employees Retirement System, who spoke at a financial-industry forum in Seoul. This is the first case for major overseas pension fund to invest in a socially responsible investing (SRI) fund in Korea. 

Launched in August 2006, Lazard's Korea Corporate Governance Fund was the first SRI fund that focused on the corporate governance issues in Korea. The fund has been aiming to build better corporate governance and raise corporate value, investing in undervalued Korean firms due to a weak governance structure. Many agreed that the fund has helped improve corporate governance and set up a new model for an SRI fund in Korea. The fund's total assets under management are estimated to be about US$200 million as of end-2007.

The Lazard fund has been actively pursuing shareholder engagement strategy, using its rights as a shareholder to push for changes in how small- to mid-size South Korean companies are managed, including the appointment of outside directors, reorganization into holding-company structures and correction of mal-business practices. The Lazard fund's holdings include Daehan Synthetic Fiber Co. (a yarn and fabric maker), its parent Taekwang Industrial Co., Dongwon Development Co. (a homebuilder), and Hwa Sung Ind. (a retailer).

CalPERS’s investment is particularly regarded as crucial at this stage and expected to create a long-term positive impact in the market. Although problems in Korean corporate governance have long been a main cause for concern for foreign investors, their voices have not been clearly heard in the market and delivered to corporate management in an effective way.

One positive development was that the National Pension Service (NPS), Korea’s biggest government pension fund, has started focusing on establishing explicit investment guidelines such as proxy voting guidelines, and began exercising voting rights based on the guidelines from last year. This move was followed by private asset management firms.