Local manager tries to oust MIRA from Korea infra fund over ‘excessive’ fees

Platform Partners says the $1.9bn Macquarie Korea Infrastructure Fund’s levies have amounted to 32% of shareholder distributions since 2006.

Seoul-based Platform Partners Asset Management, a minority shareholder in the Macquarie Korea Infrastructure Fund, is seeking to remove Macquarie Korea Asset Management as the fund’s manager, citing excessive management fees that, since its 2006 listing, amount to 32.1 percent of total shareholder distribution.

“Stripping out the fee leakage to MKAM, we believe MKIF’s true value stands at a 40 percent premium over the current share price,” Platform Partners, which owns 4.99 percent in the vehicle, wrote on 5 June in a letter addressed to MKIF’s board of directors.

While Platform had initially requested that MKIF reduce the base management fee paid to MKAM and abolish the performance scheme, another request followed earlier this week from Nexus Law Group, on behalf of MKIF shareholders, for an extraordinary general meeting and a vote to replace MKAM with a local firm. According to documents, KORAMCO Asset Management has offered management fees at 0.15 percent of net investment value per year, representing 12 percent of MKAM’s fee at 1.25 percent.

According to Platform’s June letter, “management agreements of all other Macquarie-managed listed infrastructure funds with similar or same fee schemes have been terminated and the funds have been restructured by means of internalisation and/or delisting since 2009”.

MKIF responded on Tuesday to the letter and the follow-on request that the assertions by Platform are incorrect.

“The MKIF management fee structure is a construct commonly used globally, with fee levels in line with those of other global listed infrastructure funds,” said MKIF. “Performance fees are based on terms agreed to by shareholders and only triggered when MKIF outperforms these challenging hurdles.”

In addition, the fund noted that during the early days of Korea’s PPP industry, it engaged with Macquarie Group for advisory and financial services since Korea lacked experienced advisors.

The listed vehicle has delivered a total average return of 9.2 percent per year, net of management fees, since its IPO, versus 6.7 percent for the Korea Composite Stock Price Index. This includes a current dividend yield of 5 to 7 percent on average versus 1.5 percent or less for the KOSPI, according to MKIF.

MKIF believes it is important to address any confusion and says PPAM’s motivations “do not seem to be in the best interests of the majority of MKIF shareholders”. Platform requested further information from MKAM no later than next Wednesday to verify the facts stated in the MKIF statements, which it said are misleading and inaccurate.

Macquarie declined to comment beyond its public announcements.

A source familiar with the business told Infrastructure Investor that the team has been in touch with the fund’s shareholders and it is business as usual for the fund. MKIF is making additional investment of 26.3 billion won ($23.6 million; €20.3 million) in one of its assets, the Seoul-Chuncheon Highway Company, and completed the refinancing for the project.

Platform had not responded to queries seeking further comments by the time of publication.

MKIF, which was established in 2002 and listed on the Korea Exchange in 2006, invested 1.7 trillion won in 12 infrastructure assets in Korea, including toll roads, bridges, tunnels and a port. Its total assets stood at 2.13 trillion won at of end of this year’s first quarter.

Platform has 540 billion won in assets under management as of this month and runs six funds including a Platform Partners Infrastructure Fund, according to its company website. It was founded in 2015 and is 74 percent owned by its chief executive, Jaehoon Chung.