NPS Plans to Select Three Asset Management Companies For "Corporate Value Up" Program

• On 21 February, NPS announced that it will select three domestic asset management companies to manage funds that will be allocated to the "corporate value up" program.

• NPS plans to accept proposals from the local asset management and investment advisory companies from 21 to 29 February. NPS is likely to finalize the selected candidates sometime in March.

• We provide a list of 34 companies where the NPS has at least 5% ownership stake, with PBR of 0.5x or less, and included in KOSPI 200.

On 21 February, the National Pension Service (NPS) announced that it will select three domestic asset management companies to manage funds that will be allocated to the "corporate value up" program. NPS plans to accept proposals from the local asset management and investment advisory companies from 21 to 29 February. NPS is likely to finalize the selected candidates sometime in March.

The focus of these corporate value up related funds will be to allocate increasing amount of capital to companies that are striving to increase shareholder value. Increasing capital allocation by the NPS on these companies is likely to aid in reducing the "Korea Discount" which is rampant in many companies and industries in Korea.

As of the end of November 2023, the National Pension Service managed 141 trillion won (14.1% of the fund's total assets), in the Korean equity sector, of which 51.0% of assets were outsourced to external institutional investors.

The focus of these new Corporate Value Up funds will be on improving corporate governance since this is often the most pressing reason of low valuations for many Korean companies. In addition, it is likely for the Corporate Value Up funds to increase capital allocation to companies that make real, meaningful voluntary efforts to improve their corporate governance, rather than those that make just superficial efforts.

For the National Pension Service's selection of the Corporate Value Up program, one of the selection criteria includes the asset management AUM needs to have at least 200 billion won in capital and more than 60% of the fund needs to include equity.