The Financial Supervisory Service again emphasized that it will expand the weight of stewardship activities in evaluating external managers for domestic pension funds. The aim is to assess asset managers' proxy voting and shareholder rights activities more substantively. The Korea Financial Investment Association also responded that it will improve the proxy voting framework to focus on substance rather than form.
Lee Chan-jin, governor of the Financial Supervisory Service, said at a roundtable with asset manager chief executive officers (CEOs) held at the Korea Financial Investment Association on the 13th, "When evaluating external managers for domestic pension funds, the weight of stewardship activities is set to increase," adding, "CEOs should personally ensure that shareholder rights strategies and internal control systems function effectively."
The Financial Supervisory Service (FSS) this year conducted focused inspections not only of proxy voting but of the entire shareholder rights exercise process. As a result, it selected Samsung Asset Management, NH-Amundi Asset Management, and VIP Asset Management as exemplary cases.
However, Lee noted that some managers are still making perfunctory proxy voting disclosures.
Lee said, "Even in this year's review, many copy-and-paste-style proxy voting disclosures were found," and asked, "Please thoroughly refine proxy voting policies and disclosure systems so they can communicate substantively with investors."
Lee added, "Meaningful changes in operations come from proper organizational structures and fair performance rewards," stressing that dedicated units and internal control systems such as stewardship committees must also be run effectively.
The Financial Supervisory Service (FSS) also voiced concerns about the recently fast-growing ETF market.
Lee said, "Investors rely heavily on managers' advertising when choosing ETFs," adding, "False or exaggerated advertising is a very serious matter in terms of investor protection."
Lee asked, "Ensure that accurate investment information is conveyed in ad production and in-house reviews, and work with liquidity providers (LPs) to manage tracking error diligently."
Lee also called for expanding the supply of venture capital.
Lee said, "Asset managers should actively help establish a virtuous cycle of productive finance in which they identify promising corporations, provide funding, and return the fruits of growth to investors."
The Korea Financial Investment Association agreed on the need to strengthen stewardship and said it will actively cooperate in improving the system.
Hwang Sun-uk, head of the Korea Financial Investment Association, said, "We will continue to supplement internal standards and procedures so that proxy voting can function in real decision-making processes," adding, "There also needs to be a balanced system so that managers that faithfully carry out stewardship are properly evaluated."
Hwang also expressed concern about recent market volatility and herd behavior in investing.
Hwang said, "As the domestic stock market has risen rapidly led by semiconductors, volatility has recently increased along with a correction," adding, "The concentration of funds into certain large-cap stocks and the rapid increase in individual investors' use of leveraged products are areas the industry must examine more carefully."
Hwang added, "The role of institutional funds through public funds and ETFs is more important than ever," and said, "We will carry out the tasks of investor protection, market stability, and stewardship more faithfully."