'Value Investing' Evangelist
Long-term Investment Philosophy... Reexamining the 'Donghak Ant Movement'
FSS Investigates Suspicion of Nominee Investments
Ultimately, Dishonorable Resignation
Former Meritz Asset Management CEO John Lee during his time as a US fund manager (Photo by 'You Quiz' capture)
[Asia Economy Reporter Hwang Yoon-joo] John Lee, CEO of Meritz Asset Management, who is under inspection by the Financial Supervisory Service, announced his resignation on the 28th. This comes ten days after allegations of 'nominee investment' surfaced. John Lee became famous as the key figure behind the 'Korea Fund,' the world's first fund investing in Korean companies from New York's Wall Street. He, who once made a mark in the history of the Korean capital market through 'value investing' and the 'Donghak Ant Movement,' has now stepped down in disgrace.
◆ John Lee's Comet-like Debut... Famous for New York Wall Street's 'Korea Fund'= The reason John Lee became known domestically was the 'Korea Fund.' There is a backstory to how he became connected with the Korea Fund. John Lee attended university in Korea but dropped out, then graduated from New York University with a degree in accounting and worked as a KPMG accountant.
In 1991, one of the three Fates, Clotho, appeared to him. That year, John Lee changed jobs and joined Scudder Stevens & Clark, an investment company. Scudder Stevens & Clark was the first investment company to create a mutual fund investing in Korean companies. That famous 'Korea Fund.' At the time, the Korea Fund was the largest single fund investing in Korea. After joining, John Lee managed the Korea Fund. This was the beginning of the Korea Fund legend.
From 1991, the 15 years during which he managed the Korea Fund saw a remarkable return of 1600%. The Korea Fund, which was worth 60 billion KRW at its IPO in 1984, grew brilliantly to 1.5 trillion KRW by 2005.
Another reason John Lee attracted attention was his investment philosophy toward Korean companies. He emphasized chaebol reform, corporate transparency, and shareholder capitalism as ways to overcome the undervaluation of Korean companies. He established his name not as a banker who makes a lot of money but as an investor with an investment philosophy.
◆ Evangelist of 'Value Investing'... Noted as Proponent of the 'Donghak Ant Movement'= In 2014, Meritz Financial Group recruited him as CEO of Meritz Asset Management, marking the start of his second heyday. His investment philosophy of 'value investing' gained attention.
Contrary to the stock market adage "buy at the knee and sell at the shoulder," John Lee often emphasized, "The skill is not to sell stocks." This is considered a quote that reflects his long-term investment style.
Since his appointment as CEO of Meritz Asset Management in January 2014, the cumulative return of the 'Meritz Korea Fund' he established reportedly exceeded 70% as of last year.
However, the spotlight did not last long. Since 2016, with the poor performance of equity funds, internal turmoil was reported in the industry, including the resignation of fund manager Kwon Oh-jin, who had worked alongside him for 20 years. This was understandable since John Lee rarely replaced people once hired. This was interpreted as evidence of poor fund performance.
After the COVID-19 pandemic last year, when individual investors flooded the stock market through the 'Donghak Ant Movement,' he seemed to be enjoying a resurgence, even appearing on terrestrial entertainment programs as the originator of value investing, but he fell sharply like the market index.
◆ Invested Company’s Shareholder Turns Out to Be His Wife... P2P Company Owner’s Daughter Employed by Meritz Asset Management= The downfall began with a tip-off. The Financial Supervisory Service recently conducted an on-site investigation regarding illegal and nominee investment suspicions. They are currently examining whether any laws were violated.
The investigation targeted four private equity funds related to real estate P2P products managed by John Lee. Funds 1 to 3 have already been liquidated, with only Fund 4 still holding a balance.
The problematic issues concern conflicts of interest and nominee investments. The P2P company was founded by an acquaintance of John Lee, and his wife holds a 6.57% stake. There is an interpretation that Meritz Asset Management’s private equity funds investing in this company’s products pose a potential conflict of interest.
Moreover, it was revealed that the P2P company CEO’s daughter is employed by Meritz Asset Management, raising suspicions of preferential hiring for an acquaintance’s daughter.
An industry insider said, "Even if there is no legal issue, there is room for controversy regarding conflicts of interest. Recently, as political figures’ children’s college admission scandals have drawn social attention, misunderstandings related to hiring can arise, so it seems he resigned voluntarily to prevent the issue from escalating."
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