Reporter: Hyuk Joo Kwon | Date: Apr. 09, 2013

It is an investment advisor with the total asset of KRW 210 billion under its management. There have been no dramatic ups and downs in its performance since its establishment in 2006. As of end-March 2013, the company's rates of one-year and three-year return on investment stood at 23.4% and 69.7%, respectively. According to KG Zeroin, a local fund evaluation specialist, the company's rates of one-year, two-year and three-year return all belong to the top 10% of the performance reported by local investment managers. The company has a unique name, "V&S Investment Management." The first letter "V" stands for "Value," which instantly reminds us of "value investment." The second one "S" refers to "Special Situations." What does that mean? Co-CEO Chaewon Ri (45) of V&S Investment Management explained its meaning in our interview with him.

He said: "They include events like M&A and workout. Those events tend to affect a company's share price that sometimes falls below its intrinsic value. Then we step in and buy its shares. In a sense, it is a sort of value investment." Then he took Hyundai Engineering and Construction as an example, adding: "About two years ago nobody was sure who would take the construction company. It seemed that the disposal of the construction company would go nowhere. Then its share price plunged. Considering the orders that it had received till then, the price was so cheap. Of course, we bought the shares and made profits. It is a good example of our 'Special Situations' investment strategy."

V&S Investment Management is run by two CEO's - Chaewon Ri and Namho Lee (44). The two are close friends who entered Seoul National University in 1988 and studied together at the Department of Business Administration. Co-CEO Chaewon Ri received an MBA from University of Chicago and co-CEO Namho Lee from University of Pennsylvania. Both of them worked for famous foreign investment banks.

They established V&S Investment Management in 2006. While most of local investment managers focused on 'growth stocks' expected to generate profits down the road, they looked into value stocks because they learned that value stocks had potential to continuously make profit when they worked for foreign investment banks. Co-CEO Chaewon Ri said: "Frankly speaking, I was not good at picking growth stocks because it required to see what would happen in the future."

V&S Investment Management continues to check the share prices of over 800 KOSPI companies and see if they fall below their profit and asset value. When they encounter really cheap companies they begin to analyze it. The principle is to buy a company when its price is 40% lower than its intrinsic value. They will sell it when the share price starts to reflect its value but it is not always easy to determine the selling time.

“We know that the share price has risen enough. But sometimes it seems to rise more and that makes us hesitant. So it is really hard to control the investor psychology," said co-CEO Ri.

V&S Investment Management has 50-70 value stocks in its portfolio. Unlike other investment managers that focus on a handful of companies, V&S Investment Management has a large portfolio like a fund manager. Co-CEO Ri explains that it is a way of lowering overall volatility.

With its primary focus on multiple value stocks, the investment manager's short-term investment performance sometimes lags behind that of other competitors. That happened in 2010 when large companies in automobile, chemistry and refinery sectors posted a steep rise in their share price. In this regard, co-CEO Ri said, "We explain our investment philosophy and strategy to our prospective clients before accepting their money. As a result, 90% of our existing clients renew their one-year contract later."

The first investment product of V&S Investment Management was launched on October 8, 2007 and its cumulative rate of return over the past 5.5 years stands at 122% as of end-March, 2013.

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