Daishin Asset Management is rolling out a fund that invests in South Korean companies taking an aggressive approach to shareholder returns, counting not only dividends but also share buybacks and cancellations.
The firm said on the 6th that it is launching the Daishin Shareholder Return High Dividend Fund. The equity fund screens for stocks that combine large shareholder returns — dividends plus buybacks and share cancellations — with relatively low valuations.
Its core investment metrics are the shareholder return ratio and the shareholder return yield. The return ratio measures the share of a company's earnings handed back to shareholders through dividends, buybacks and cancellations. The fund pairs that with the shareholder return yield, which factors in the current share price, to judge whether the scale of returns is attractive enough to warrant investment.
Share prices also determine when the fund trades. If a holding's price rises sharply and the relative appeal of its shareholder returns weakens, the fund sells to lock in gains. If a price correction restores that relative value, it buys back in.
The sustainability of those returns is another key factor. The fund gives priority to companies that carry out shareholder return policies consistently rather than on a one-off basis. It also weighs stable cash generation and earnings improvement to identify companies with the capacity to keep returning capital.
Daishin Asset Management sees the low shareholder return levels of Korean companies as a future investment opportunity. Based on this year's projections, the firm said the shareholder return ratio for Korean companies stands at 31%, about half the levels in the U.S. (70%) and Japan (67%). Because returns remain low compared with advanced markets, the firm argues there is considerable room for corporate valuations to be reassessed as Korea's capital markets push to strengthen shareholder returns.
The publicly offered fund, which invests at least 60% of assets in equities, was established the same day. It is available through 10 distributors including Daishin Securities (003540.KS), with more to be added.
"The market now treats how a company shares its results with shareholders, not just its earnings, as a core measure of corporate value," said Lee Jae-woo, executive vice president and head of marketing at Daishin Asset Management. "What sets this fund apart is that we look beyond dividends to how much is returned to shareholders and how attractive that value is at the current share price."
