South Korea’s Lime Asset Management Co. will introduce the country’s first so-called activist hedge fund later this month with an aim of seeking returns by actively taking part in a company’s management and decision-making process to improve dividend payments and overall corporate governance.

According to multiple sources from the financial investment industry on Wednesday, Lime Asset Management will launch a hedge fund called Lime Democracy as early as next week, and the fund will invest primarily in companies with growth potential but lacking governance transparency or paying lower than expected dividends compared to their cash hoard.

Won Jong-jun, chief executive of Lime Asset Management, said an environment is created to introduce activist hedge funds in Korea after the introduction of stewardship code, a guideline for institutional investors to exercise their voting rights. There are also many companies in Korea that need to improve corporate governance and pay still low dividends despite high reserves, he added. This will be the first activist hedge fund to be launched in the country.

Lime Asset Management, with assets under management of 250 billion won ($213.3 million), is the ninth-largest hedge fund manager among 70 others in Korea. The firm was set up by Won, former fund manager at Truston Asset Management Co. and Brain Asset Management Co., in August 2012, as an investment consulting company. It switched to a hedge fund management firm in December last year.

An activist hedge fund is aimed at maximizing shareholder interest in a shorter term, normally within one to two years, by maximizing shareholder value by asking for more dividend payouts and share buybacks. Activist investors also take more active part in management such as promoting new businesses and corporate restructuring.

By Choi Jae-won

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