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(LEAD) S. Korea's sovereign fund to consider canceling contract with Elliott

All Headlines 15:21 May 17, 2018

(ATTN: ADDS details in last 2 paras)

SEOUL, May 17 (Yonhap) -- South Korea's sovereign wealth fund will consider canceling a contract with Elliott Management, its head said Thursday, citing conflicts of interest after the U.S. hedge fund launched a legal dispute with the Korean government over a merger of two Samsung units.

Choi Hee-nam, chief executive of the $134.1 billion sovereign fund, told reporters that Korea Investment Corporation (KIC) is closely monitoring the legal dispute between Elliott and the Korean government.

KIC invested $50 million into a fund managed by Elliott under the contract, Choi said.

"The sponsor of KIC is the (Korean) government, and Elliott presented something to the government," Choi said, referring to the legal dispute over the merger of two Samsung units in 2015.

(LEAD) S. Korea's sovereign fund to consider canceling contract with Elliott - 1

In a statement, Elliott has said it is seeking to negotiate with South Korea over compensation for the U.S. fund's damages stemming from the former administration's "unlawful intervention" in the merger of Samsung C&T and Cheil Industries.

Under the bilateral free trade deal between South Korea and the United States, a company from one country can take a legal action against the counterpart's government over investment damages.

Elliott, who held about a 7 percent stake in Samsung C&T, lost a proxy fight to block the merger, which was backed by the state-run National Pension Service (NPS).

The merger was widely seen as a step to enhance Samsung Group heir apparent Lee Jae-yong's control of the conglomerate.

But it became the center of a massive corruption scandal that led to the ouster of former President Park Geun-hye and Lee's arrest.

Park has been sentenced to 24 years over the scandal pending an appeal. Lee also served a jail term before he was set free in February after an appellate court suspended his sentence.

The former health minister and the head of NPS' fund management unit also faced trials for allegedly exerting influence for the merger.

Meanwhile, KIC will expand its asset size to $200 billion by 2020, Choi said.

With the size of assets growing, KIC plans to put 19 percent of its fund into alternative assets such as hedge funds and real estate, an increase from the current level of 14 percent, Choi said.


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