[Value and Returns Together, Women’s Fund] ② KCGI The Women Fund Riding the 'Sheconomy' Shows 'Excellent' Returns

Interview with Myeong Jaeyeop, Head of Equity Management Team at KCGI Asset Management
"Focus on 'Women Producers' as well as 'Women Consumers'"

"Until now, we focused only on 'women as producers,' but now the strategy is to also consider 'women as consumers.' By including companies that can grow on both sides in the fund, we have been able to achieve excellent returns."

'KCGI The Women Fund' is the first 'gender equality-focused investment' fund launched in the domestic asset management industry in 2018. Unlike typical funds that take the form of beneficiary certificates, KCGI The Women Fund was launched as a company-type mutual fund where investors are shareholders.

Myeong Jaeyeop, Head of Equity Management Team at KCGI Asset Management. Photo by KCGI Asset Management

On the 9th, at KCGI headquarters in the International Finance Center (IFC) in Yeouido, Seoul, we interviewed Myung Jae-yeop, head of equity management at KCGI Asset Management and the lead portfolio manager of KCGI The Women Fund, to discuss the background of the fund’s launch and the know-how behind its recent high returns.

"Return Increase through Expansion of Investment Targets"

KCGI The Women Fund started by targeting companies with a high proportion of female participation in management. This was a different approach compared to other asset management firms that were reluctant to create female-related fund products. Accordingly, the fund has invested in companies that combine favorable financial statements and growth potential by considering quantitative indicators such as 'average years of service by gender,' 'salary gap,' and 'female executive ratio,' as well as qualitative evaluations like 'corporate culture' and 'company efforts.'

Myung explained, "As Korea’s first 'gender equality fund,' we signed an advisory contract with Sustainalytics, an ESG (Environmental, Social, and Governance) consulting firm. The premise was that excellent female talent would be attracted to companies with gender-equal employment and maternal protection programs, which would lead to higher corporate value in the mid to long term."

Since taking over as portfolio manager in the second half of last year, Myung upgraded the strategy. He said, "The main focus when adding the new strategy was the fund’s 'return.' I believed that the reason most existing socially responsible funds have not received steady market attention is ultimately due to poor returns. No matter how important and righteous the values are, the ultimate value of a fund or investment company is customer returns."

In this process, he paid attention to the growing influence of the 'Sheconomy.' Sheconomy is a compound word combining 'She,' a pronoun for women, and 'Economy,' referring to an economy where women are the main agents of consumption. Myung said, "We added 'growth companies aligned with the trend of increasing women's purchasing power and decision-making' as a strategic pillar," noting that there are industries such as automobiles and IT devices where traditionally men had a higher purchasing decision ratio, but recently women’s decision-making power has increased."

He added, "Traditionally, the K-pop and men's fashion markets also have high female purchasing decision power. In the case of K-pop artists, boy groups rather than girl groups, specifically artists with large female fandoms, have much greater revenue-generating ability," and "Recently, markets that did not exist before, such as beauty medical devices and home beauty, have emerged, and stocks benefiting from these have been included in the fund. We also view positively the cosmetics sector, which is expanding exports from China and Southeast Asia to advanced countries like the U.S. and Europe."

"Positive Responses from Fund-Included Companies... Expected to Establish as a Leading Consumer Goods Fund"

The results were quickly confirmed. As of the end of April, the fund recorded returns exceeding the benchmark KOSPI by 6.9% over six months and 11.8% over nine months. According to KG Zeroin, a fund evaluation company, these performances place the fund within the top 5%. The current net assets are approximately 23 billion KRW. The most recent proposal added companies such as iFamilySC, which has remarkable growth in cosmetics exports in advanced markets, and Classys, specialized in skin beauty and home care.

The long-term value of a gender equality fund is also steadily being realized. A portion of KCGI Asset Management’s management fees is set aside annually to be donated to organizations supporting women, single parents, and birth rate improvement. Myung emphasized, "KCGI Asset Management does not remain passive in investment but actively exercises shareholder rights and proposals. The Women Fund is no different. Through continuous meetings with investee companies, we introduce and suggest various best practices regarding gender equality and maternal protection programs. We also request ongoing improvements."

The response from invested companies has been positive. He said, "They accept it much more smoothly and positively than when we demand governance and shareholder returns," adding, "Last month, The Women Fund held its first general shareholders’ meeting and shareholder event, where representatives from exemplary companies among the investees came to introduce their gender-equal employment status and maternal protection programs." According to KCGI Asset Management’s direct sales analysis, more parents are gifting funds opened in their children’s names with the intention of living a better future.

Myung said, "My personal hope is that companies included in KCGI The Women Fund will be recognized as 'companies with excellent gender equality and maternal protection programs,'" and "I hope it will also establish itself as Korea’s 'leading consumer goods fund' in the future."