Korea's sovereign fund considers canceling contract with Elliott

Korea Investment Corp (KIC)., South Korea's sovereign wealth fund, will consider canceling an investment contract with US activist hedge fund Elliott Management, its head said on May 17.

Choi Hee-nam, chief executive of the $134.1 billion fund, told reporters that KIC is closely monitoring a legal dispute between Elliott and the Korean government and prosecutors’ investigation into the hedge fund on charges of violating stock transaction regulations.

Elliott is pushing for an investor-state dispute (ISD) over the merger between Samsung C&T and Cheil Industries, claiming that it suffered losses due to the Korean government’s involvement in the merger.

KIC is considering withdrawing the US$50 million it invested into a fund managed by Elliott under the contract.

"KIC is an operator of the Korean government’s funds. Therefore a conflict of interest would arise if Elliott files a suit against the Korean government," Choi said.

Elliott has not yet filed a suit against the Korean government. In a statement, it said it would seek to negotiate with the Korean government over compensation for its damages stemming from the former administration's "unlawful intervention" in the merger of the Samsung firms.

Elliott, who held about a 7 percent stake in Samsung C&T, sought to block the merger, but it lost a proxy fight as the state-run National Pension Service (NPS) supported the merger.

Yet Moon Hyung-pyo, a former minister of health and welfare during the Park Geun-hye administration and subsequent chairman of the National Pension Service (NPS), was found guilty of abusing his authority and pressuring the NPS to cast a key vote in favor of the merger.

The court ruling motivated Elliott to claim compensation from the Korean government.

Yet the Ministry of Justice has rejected Elliott’s demand for compensation and is preparing for a legal battle.

Prosecutors have also launched a probe into the allegations that Elliott violated stock trading regulations in the process of acquiring Samsung C&T shares.