AVI’s Korea Opportunity

AVI argues that South Korea has moved from a governance-constrained market to a potentially attractive activist-investing opportunity, combining political reform, extreme valuation discounts and under-researched companies.

• AVI had historically struggled to become enthusiastic about Korea because of chaebol governance problems, but in the eight months to January 2026 it built positions of 15% in AVI Global Trust and 20% in AVI Global Special Situations.
• President Lee Jae-myung’s Democratic Party controls 175 of 300 National Assembly seats until at least April 2028, while two 2025 Commercial Act amendments expanded directors’ duties to all shareholders, introduced cumulative voting for companies with more than ₩2 trillion in assets, and strengthened independent audit oversight.
• As of December 2025, the KOSPI traded at about 1.4x forward book value versus 2x for emerging markets and 3.5x for developed markets; roughly 70% of listed stocks traded below book value and 40% below 0.5x book value.
• Foreign ownership was approximately 36%, while Samsung Electronics and SK Hynix represented 51% of the MSCI Korea index; at the end of January 2026, 60% of KOSPI constituents had no sell-side coverage and 68% had fewer than two brokers.
• AVI sees improving practices at Samsung Electronics, Samsung Biologics, Hyundai Motor Group and SK Group, alongside rising domestic activism and reforms such as a dividend-tax reduction from 49% to 30% for qualifying companies; a treasury-share-cancellation amendment was expected in Q1 2026.

Takeaway: AVI believes Korea offers unusually fertile ground for bottom-up value investing and constructive, culturally sensitive engagement, but the opportunity depends on reforms continuing and governance improvements translating into better capital allocation and re-rating; its Korea allocation exceeds 15% versus less than 1% for the MSCI World ACWI.