As we have highlighted on previous occasions, a key trend in Tideway’s portfolio strategy over recent years has been to allocate the core of our equity exposure on a global basis, rather than constructing it region by region from the ground up.
The main advantage of this approach is that it provides our fund managers with the broadest possible investment universe from which to implement their specific strategies. This avoids the limitations of being restricted to a particular country, where attractive investment opportunities may be scarce at any given time.
A secondary benefit of this global approach is its flexibility. Compared with a purely regional strategy, our managers can respond more quickly (than Tideway could) to shifts in relative opportunities across different regions and deploy capital more efficiently.
In addition, investing globally has allowed us to capture standout returns in less conventional markets, areas we would not typically be able to allocate too directly. Had we adopted a strictly regional or style-based approach, we would likely have missed out on strong performance from lesser-known or harder-to-access markets.
To be clear, we continue to monitor all regional exposures on a ‘look-through’ basis and make adjustments where appropriate. This includes selectively topping up regional exposures, such as in the US or UK, where we believe additional weighting is warranted beyond what is captured through our managers’ bottom-up stock selection.
As always, our objective remains to build a diversified and resilient portfolio that can protect capital while competitive seeking long-term returns for our clients.
South Korea
Most major developed markets have delivered strong returns year to date in local currency terms. One market that may have gone unnoticed by many investors, however, is South Korea. The country’s primary equity index, the KOSPI, has returned an impressive 33% year to date, making it one of the top-performing markets globally in 2025.
South Korea recently passed a major change to its corporate law to improve how companies treat all shareholders, including small investors. This is part of a bigger effort to fix what’s known as the ‘Korea Discount’ – the idea that Korean stocks often trade at lower prices than similar companies in other countries, mostly because of poor transparency and complicated family-run businesses.
The new law, passed in July 2025, strengthens rules to make company boards more accountable and limits the power of controlling families in certain shareholder votes. These changes build on the Corporate Value-Up Programme, which the government launched in 2024. That programme encourages companies to raise dividends, buy back shares, and improve their communication with investors, much like what Japan did successfully over the past decade. Over 100 companies have already joined the Value-Up Programme, and more are expected to follow.
No fewer than four of the funds we allocate to, whether global in scope or focused on the Asia Pacific region, currently have exposure to South Korea. One of our most significant positions, in addition to more traditional holdings (plus the top performing Hanwa Aerospace – Artemis Global Income which we have covered in previous updates), has been an allocation to South Korean banks.
These banks have been among the key beneficiaries of the Corporate Value-Up Programme, introduced in 2024, which aims to enhance shareholder returns and improve corporate governance. From a share price perspective, they have delivered particularly strong performance year to date, reflecting renewed investor confidence and improved valuations across the sector.
Year to date, the estimated contribution from South Korea within Tideway’s Core Equity portfolio has been approximately 1.4%, compared with the MSCI ACWI’s return from South Korea of just 0.3% over the same period. This contribution has come from an average portfolio weight of only around 2.7% in South Korean equities. Notably, South Korean banks accounted for roughly half of the total South Korea-related gains.
While we are subject to a holdings delay with all our managers, and do not receive transaction prices for exited positions, this estimate highlights the strength of manager asset allocation and stock picking within South Korea. Despite a relatively modest capital allocation, our managers have managed to generate outsized returns for Tideway clients.
This illustrates the value of allocating capital on a global basis, with positioning in lesser-known, and perhaps more inefficient markets, delivering meaningful contribution to performance without the need for large portfolio exposure.
Valuation discipline and active management
Some of our strongest portfolio contributions this year have come from managers who maintain a clear valuation discipline within their investment process. Sectors such as financials and industrials, where valuation opportunities have been more compelling, have delivered particularly strong returns.
Our value-focused managers have been especially effective in this environment. They have actively trimmed positions where the investment thesis has played out and valuations have become stretched, reallocating capital into areas of the market that remain undervalued but offer strong upside potential. This disciplined, opportunistic approach stands in contrast to passive investing, where holdings are retained regardless of valuation or outlook.
In today’s market, where overall valuation levels remain elevated relative to historical averages, the passive approach comes with risk. Index-driven strategies are increasingly concentrated in a small number of high-growth names, where performance relies heavily on continued healthy earnings growth. Should this growth falter, or if valuation multiples begin to contract, passive investors may face some performance headwinds.
By contrast, our active managers are not tied to holding positions in perpetuity. Their ability to rotate capital based on changing valuations and fundamentals allows us to better navigate both risks and opportunities in a dynamic market environment.
