Korea's Meritz Group likely to sell off its asset management arm

South Korea’s Meritz Financial Group Inc. is poised to sell off its subsidiary Meritz Asset Management Co., The Korea Economic Daily understood on Nov. 1.

The group is in talks with potential buyers including activist fund Korea Corporate Governance Improvement (KCGI) and has hired NH Investment & Securities Co. as the lead manager of the deal.

“We are open to every option to strengthen our asset management capabilities. Nothing has been confirmed on divesting the subsidiary yet,” a Meritz Financial Group official said.

Founded in 2008, the asset management arm is wholly owned by Meritz Financial Group, the holding company.  

The asset manager gained a reputation in 2014 as it successfully closed some small- and large-cap funds. In 2020, the firm began to garner huge attention from investors with its value investing philosophy, which involves buying stocks at a discount to their intrinsic value.

But the firm has lost the trust of the market as its former CEO and investment guru John Lee in June was accused of violating capital market law.

He is alleged to have used his wife’s account to invest in a local peer-to-peer real estate company, which was founded by his friend in 2016. Lee is also accused of having added the company to Meritz Asset Management’s investment portfolio.

Korea’s Financial Supervisory Service (FSS) is reviewing imposing restrictions on his investments. Lee resigned from the CEO position as he went under investigation in June.

As his resignation in disgrace heavily impacted the asset management firm’s brand image, the group decided to divest the unit, investment banking sources said.

Meritz Asset Management posted 2.5 billion won ($1.8 million) in net losses during the first three months of this year. It achieved 4.2 billion won in net profit in 2021.

Write to Ui-Myung Park at uimyung@hankyung.com
Jihyun Kim edited this article.