Calls grow for NH Investment to redeem Optimus investors

A man walks past the entrance of the head office of Optimus Asset Management in Seoul. Korea Times file

By Lee Kyung-min

Attention is growing over whether some 800 people who put money into the scandal-ridden Optimus Asset Management will have up to 50 percent of their initial investment returned, pending a board meeting of NH Investment & Securities this week.

The investment subsidiary of NH Financial Group was the top seller of financial products through which Optimus attracted over 500 billion ($416 million) from investors. It brought in 452.8 billion won, accounting for nearly 90 percent of the total, followed by Korea Investment and Securities with 28.7 billion won.

The NH board is expected to deliberate on how much of the initial investment the securities subsidiary should return to those whose request for redemptions on a combined 440 billion won investment have yet to be processed.

Pressuring a prompt return is Korea Investment and Securities' plan to return to investors 20.1 billion, accounting for 70 percent of the 28.7 billion won it sold. The amount, however, will be given on the condition that the investors do not file a civil suit seeking damages or a complaint with the Financial Supervisory Service (FSS).

The board is likely to determine whether the securities subsidiary should return up to 70 percent of the initial investment with a similar condition attached, or set the ceiling at 50 percent with the amount to be paid finalized later by a dispute mediation committee under the FSS.

Also factoring into the decision will be its financial soundness certain to deteriorate if it returns up to 70 percent of the initial investment, or 321 billion won, which will end up being covered by loan loss reserves.

Funds pulled from the reserves are not much of a concern if it involves deals with solid asset management firms with an unquestionable ability to pay back.

But given over half of Optimus-run assets are shaky, the reduced funds in the reserves will deal a direct blow to earnings of the NH Investment, which reported a net profit of 476.4 billion won in 2019.

NH Investment being a listed firm is another stumbling block to a quick determination.

Korea Investment and Shinhan Financial Investment, which made a similar decision for investors in another scandal-ridden hedge fund, Lime Asset Management, are not listed. They are an investment subsidiary entirely-owned by their holding firms.

This means any major decisions concerning the two require approval only from holding firms, unlike NH investment which must seek an agreement from shareholders including the National Pension Service with an 11 percent stake and its employee union with 1.5 percent stake.

Given the NH board comprises members recommended by shareholders, it will not give an immediate go-ahead to a decision that will hurt corporate profit, resulting in a nosedive of the firm's shares.

The Optimus scandal first broke out in June over suspected document forgery by the company which had the Korea Securities Depository (KSD) change the names of underlying assets from accounts receivables issued by state-run organizations with robust financing, to bonds payable issued by five non-listed firms with unsound financing.

Three key officials from Optimus were arrested for fraud and violating the Capital Market Law.