[The Fountain] A novel value fund: no profit, no fee
JANG WON-SEOKThe author is a stock market news reporter for the JoongAng Ilbo.
Value investing is buying undervalued stocks and selling when the prices go up. Investors have different styles of evaluating the value, but they have a common goal: looking for a diamond in the rough. The history of value investing in the U.S. is long, starting with Benjamin Graham, the father of value investing.
The 1970s and 80s were the heydays. Many legendary investors such as Warren Buffett, John Neff and Philip Fisher were active.
Today, the prestige of value investing is not what it used to be, as the industrial composition has changed to be centered around the service industry and intangible assets whose values are hard to evaluate are growing. Nevertheless, the key principle of value investing is still alive in the market in various forms.
In Korea, it is not easy for investors to engage in value investing, as the stock market is small and has a short history. The economic structure swayed by foreign variables is also a weakness.
Companies are stingy with activities enhancing values, such as increasing dividends. It is common for owners to split their company after growing it. In the process, the interests of shareholders are not properly protected.
Even in this environment, CEOs Choi Joon-chul and Kim Min-guk have expanded VIP Asset Management, which they founded during college with a motto of value investing, to a 3 trillion won ($2.29-billion) company in 20 years. They share the philosophy and have been partnering for a long time, resembling the paths of value investing legends. This is unusual in Korea in itself.
The two CEOs recently took on a new challenge. They presented a fund that won’t take a fee if they make no profit. It has been seen in private equity funds or advisory markets, but this is the first time to link performance to a public offering fund that anyone can buy.
Not taking a fee without a profit is an expression of the will to take responsibility for customers’ money. If the previous one-year return is negative, they won’t get paid. If they make a profit, they will receive a 10 percent fee. And 0.8 percent annual fee is applied regardless of the profit for investing less than one year. It is a way to encourage long-term investments.
It is a Korean-style value investing fund. Rather than being swayed by short-term trends, they are determined to grow it into a fund that lasts. They sound more convincing, especially when investments following themes and seeking short-term profits are popular.
As they have the justification of revitalizing the public offering fund market, which has rapidly shrunk due to aggressive fee policies, they designed it well.
Even if everything is good, what matters is the competency or the rate of return. I hope it will grow into a fund that goes with peoples’ retirement as they aspire to be.
with the Korea JoongAng Daily
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