[Interview] Bank Sniper Lee Chang-hwan CEO "Creating a 1 Trillion Won Fund"

Aggressive Push of a Newly Launched Fund in Just Over a Year
"Minority Shareholders' Rights Ignored, Companies Undervalued"

[Asia Economy Reporter Park So-yeon] The momentum of Align Partners, a domestic activist private equity fund management company, is formidable. This virtually unknown company, which has been operating for just over a year, is leading governance reforms at SM Entertainment and changes in shareholder return policies at domestic financial holding companies. Issues raised by CEO Lee Chang-hwan of Align Partners have attracted attention, and as movements for change have emerged, the stock prices of the companies targeted by him have also moved. While the KOSDAQ market fell by 23% last year, SM's stock price rose by 22%. The stock prices of the four major financial holding companies?KB, Shinhan, Hana, and Woori?have risen by more than 20% since the beginning of the new year. In particular, JB Financial Group's stock price, which hovered around 7,000 won just three months ago, surpassed 10,000 won as of the 18th. Align Partners is the second-largest shareholder of JB Financial Group. Born in 1986, CEO Lee Chang-hwan is demonstrating performance that surpasses even the leading figures of the MZ generation in the capital market just one year after establishing the fund.

Lee Chang-hwan, CEO of Align Partners. Photo by Align Partners

CEO Lee Chang-hwan opened by saying, "We are currently managing funds worth 270 billion won across three funds, and we aim to grow our assets under management (AUM) to 1 trillion won by the end of this year." He added, "We plan to raise some institutional funds from overseas," and said, "We will persuade investors by showing cases of corporate value improvement created through Align's active shareholder activities targeting SM and financial holding companies in Korea, and invest in Korean listed companies using the same approach." Since many domestic companies still prioritize the interests of major shareholders, he plans to continue efforts to increase corporate value through shareholder activism. They intend to form a blind fund with overseas institutional capital to scale up and act more aggressively.

CEO Lee graduated from Seoul National University with a degree in Business Administration, worked at Goldman Sachs, and in 2012 joined as a founding member of the Seoul office of Kohlberg Kravis Roberts (KKR), one of the world's top three private equity firms. In 2021, amid the height of the Donghak Ant movement, he felt the necessity of shareholder activism, left KKR, and established Align Partners. CEO Lee recognized the trend of growing interest from small shareholders in companies as the number of domestic individual investors surged to 14 million during the COVID-19 boom.

CEO Lee Chang-hwan emphasized, "I learned global standards while working at a large company," and said, "There are many irrational Korean listed companies where major shareholders hold all the power but bear no legal responsibility, and I want to improve this irrational structure." He pointed out, "A company with 1 trillion won in capital is valued at 1 trillion won when listed in Korea, 2 trillion won in Taiwan, and 4 trillion won in the United States. A corporation is supposed to share profits according to shareholding, but because those holding 20% of shares control the company and those with 1% get nothing, corporate value is undervalued." Using Taiwan as an example, he said, "Despite unstable conditions due to conflicts with China, Taiwan's valuation is twice that of Korea because its system is well organized." CEO Lee analyzed that the value of ordinary shareholders, who are naturally protected in advanced capital markets, is ignored in Korea, leading to a decline in trust in the domestic capital market. This is the fundamental reason for the decline in valuation of domestic listed companies and the difficulty companies face in raising funds.

Over the past year, CEO Lee has been actively involved in corporate management to increase corporate value. The immediate task is to create visible changes in shareholder return policies, such as expanding dividends at financial holding companies. Align Partners recently sent open letters to seven major domestic financial holding companies, including KB and Shinhan, demanding "shareholder returns of 50% of annual net income." This is because domestic banks, despite earning profits comparable to overseas banks, are stingy with shareholder returns such as dividends and share buybacks. He requested that each holding company express their position on this matter by the 9th of next month.

CEO Lee criticized, "When banks earn money, there are three paths: they can accumulate capital, grow loans, or pay dividends. Domestic banks are only increasing loans and not paying dividends properly." He said, "Our country's debt-to-GDP ratio is too high, which is burdensome," adding, "Because of this, asset prices are soaring, and banks could become insolvent." Furthermore, he said, "People think banks are holding onto money if they don't pay dividends, but actually, they have been continuously lending." If the shareholder return policies of financial holding companies are insufficient, CEO Lee plans to execute shareholder proposals under the Commercial Act, directly submitting agenda items to shareholder meetings. He emphasized, "It's really exhausting work, but not only this year, but next year and the year after, we will continue. Foreigners cannot step in, so someone has to do it, and Align will take the lead."