Michael Burry's protg warns of a "value trap" in the South Korean stock market.

Michael Burry's protg warns that behind the low valuations of South Korean stocks lurks a trap: much of that value is often out of reach for minority shareholders. Phil Clifton, founder of Cupertino, California-based Pomerium Capital Management LLC, met with about two dozen companies in South Korea and Japan during an August trip. According to a September 29 letter to investors seen by the media, he returned convinced that investing in South Korea "requires extra caution and close attention to management's incentives." He wrote in the letter: "The South Korean stock market at first glance looks like a capitalist paradise," full of companies with healthy profit margins and steady growth. But he noted that there is often a misalignment between shareholder interests and the interests of those who actually run the companies. Clifton said that although many South Korean companies trade at substantial discounts to global peers, that extra value is often something minority shareholders cannot truly benefit fromespecially at companies where founding families retain absolute control.