South Korea’s biggest institutional investor National Pension Service (NPS) has decided to push forward with the plan of introducing the so-called stewardship code, a guideline for institutional investors to exercise their voting rights. A stewardship code would encourage investors to be more actively involved in corporate management such as in the decision-making of merger and acquisitions and dividend payouts with the goal of maximizing shareholder benefit.

The move by the biggest player could persuade other public funds, mutual aid associations, and asset managers to adopt similar guideline to ensure healthy and transparent corporate activity.

Kang Myoun-wook, chief investment officer (CIO) at NPS, told Maeil Business Newspaper that he believes a stewardship code is worthy enough as a guideline for long-term investors to exercise rational shareholders’ rights and that the national pension fund that manages 545 trillion won ($467 billion) will positively consider adopting stewardship code as soon as final plan is confirmed after listening to opinions of various interest groups. It is the first time that NPS has officially opened its position on adopting a stewardship code.

It will be up to the NPS’s fund management committee formed of 20 members to decide whether or not to adopt a code. Kang, the highest working-level official of NPS and a member of the committee, will play an important role in the decision-making process.

Chang Jae-hyuk, director of welfare policy at the Ministry of Health and Welfare, also said NPS will decide introduce the new investment guideline after holding various social discussions. The Korea Corporate Governance Service, an institution formed by Korea Exchange that offers advice on investors exercising their voting rights, plans to announce its own review on the stewardship code plan on December 16.

The NPS plans to scale down investment in domestic bonds next year amid concerns of higher yields hurting the market. Kang from NPS said that by the end of next year, it aims to reduce its investment in domestic bonds so that they account for 49.5 percent of total investments. The move will be taken stage by stage so that it does not trigger market shock, he added.

The NPS instead plans to expand its investment share in overseas equities and alternative investments. As of end of September, 286 trillion won or 52.5 percent of total managing funds of 545 trillion won was invested in domestic bonds. It will be for the first time for the share to drop to below 50 percent since the NPS Investment Management was founded in 1999.

By Choi Jae-won and Hong Jang-won

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]