Platform Partners Asset Management Co. (PPAM) has succeeded in eliciting support from some shareholders of Macquarie Korea Infrastructure Fund (MKIF) for its demand that the fund cut its commissions and performance-related pay to Macquarie Korea Asset Management (MKAM), the fund’s project manager.
In response, MKAM said it would enhance the fund’s profitability by expanding investment in more lucrative areas, such as renewable energy, instead of a cut in commissions.
As a result, the two sides are expected to have a proxy battle at the general stockholders' meeting to be held as early as next month.
According to investment banking (IB) industry sources on July 22, an institutional investor that has more than a 5 percent of stake in MKIF recently suggested that the fund lower its management commissions and performance-related pay to MKAM.
An official from the investor said, “We have conducted an internal review after Platform brought up the issue. We believe that the current cost for operating the toll roads invested by MKIF has fallen significantly compared with the initial period of investment. As the investment period is lengthened, the commissions paid to the fund management company should get lower.”
As of the end of March, MKIF investors include UK-based Newton Investment Management Limited with an 8.2% stake, Hanwha General Insurance Co. and Shinyoung Asset Management Co. with a 6.1 percent stake each, and Macquarie Group with a 3.6 percent stake.
Platform has asked to hold a general stockholders' meeting in order to either change the MKIF manager from MKAM to Koramco Asset Management or cut its commissions by a tenth. Platform owns a 3.17 percent stake in MKIF.
When a stockholder with over a 3 percent stake requests a general shareholders’ meeting, a company must hold a board meeting within a month to decide on whether to call a general meeting of stockholders.
Platform can exercise voting rights equivalent to up to a 4.99 percent stake as it has secured a friendly stake of 1.79 percent through a stock swap with other securities firms. MKIF is planning to hold a general meeting of stockholders.
Platform argues that the 11 toll roads and one port invested by MKIF needed a lot of operational capabilities at the early stage of investment but now make stable profits without additional input as more than 10 years have passed.
An official from Platform said, “Macquarie Group operates 8 infrastructure funds around the world. Among these funds, seven have cut management commissions or eliminated them altogether after 2012. Only MKIF in South Korea still maintains the initial payment structure and management firm for 12 years now.”
Canada-based Brookfield Asset Management Inc., which is bigger in size than MKIF, has invested in 36 infrastructure assets in Europe, India and the Americas but its commissions payment structure is similar to that of MKIF that has invested mainly in roads in South Korea.
Regarding this, MKAM said that it has to deal with unexpected risks and take legal action against the government when its profits fall short of expectations. It also added that other asset management firms at home and abroad cannot catch up with its years of investment competence in private sector projects.