Mastern Investment Management, a South Korean asset manager specializing in alternative investments, said on the 30th that it has adopted the Stewardship Code, which embodies the fiduciary duty principles of institutional investors, and completed registration as a signatory. It is a case of a large independent alternative investment manager joining the Stewardship Code preemptively, and it is unusual for a manager centered on private equity, real estate and infrastructure — largely unlisted assets — to establish a public principles framework.
The Stewardship Code is a set of guidelines that institutional investors must follow to fulfill their responsibilities as fiduciaries managing and operating assets entrusted to them by clients. The “Principles for Institutional Investors’ Fiduciary Duties” that Mastern Investment Management established and disclosed set out the company’s implementation framework, current status and future plans for each of the seven principles of the Korea Stewardship Code, including fiduciary duty policies, prevention of conflicts of interest, monitoring of investee assets, exercise of voting rights, reporting of implementation status and securing capabilities.
In particular, reflecting its characteristics as an alternative investment manager, the company specified its policy of fulfilling fiduciary duties from a perspective encompassing asset inspection, risk management and value enhancement across the entire investment process, from acquisition through holding and management to disposal. The key point is that it has extended the traditional stewardship framework — designed mainly around the exercise of voting rights on listed shares — into life-cycle management of unlisted assets.
Going forward, the company plans to publish a “Fiduciary Duty Implementation Report” on an annual basis, including its exercise of voting rights and implementation status for managed assets, to strengthen communication with investors.
Park Hyung-seok, CEO of Mastern Investment Management, said, “Adopting the Stewardship Code is about systematizing, through the company’s principles and procedures, our responsibility as a fiduciary managing assets entrusted to us by clients.” He added, “We will steadily monitor our implementation framework so that responsible decision-making takes place in actual management in line with the disclosed principles, and we will transparently disclose the results.”
Since the Korea Stewardship Code was introduced in 2016, pension funds, asset managers and insurers have participated, but participation by alternative investment specialists has been relatively rare. Because unlisted assets have limited public pricing and limited exercise of voting rights, how to demonstrate the fulfillment of fiduciary duties has been cited as an issue.
Industry observers see the adoption as a signal that the scope of South Korean institutional investors’ fiduciary duties is expanding from listed shares to alternative investments. As overseas pension funds and global asset managers increasingly require managers’ governance systems and responsibility-reporting frameworks as due-diligence items when entrusting alternative investment funds, the disclosed principles and annual report are expected to serve as reference materials in attracting overseas entrusted capital.
Still, some point out that verification is needed on whether the implementation results contained in the annual report actually lead to enhanced asset value and risk management. Given the nature of alternative investment assets, how performance metrics and the scope of disclosure are set is likely to be key to establishing the system.