UPDATE 2-S.Korea's pension fund to participate in management of Korean Air Lines' parent

* NPS to assert shareholder rights in Hanjin Kal’s management

* NPS is the third-largest shareholder of Hanjin Kal

* Hanjin expresses concern over the NPS decision (Updates share price)

SEOUL, Feb 1 (Reuters) - South Korea’s National Pension Service (NPS) said it will actively assert its rights as a shareholder and participate in the management of Hanjin Kal Corp , parent of the country’s flagship carrier Korean Air Lines.

The decision by the world’s third-largest pension fund comes at a time when Korean Air Chairman Cho Yang-ho is facing trial on charges of embezzlement and breach of trust and when the airline’s image has been hit by actions of his family members.

The NPS, which is run by South Korea’s Ministry of Health and Welfare, is the third-largest shareholder of Hanjin Kal with a 7.34 percent stake. It also owns 11.56 percent of Korean Air, making the fund the No.2 shareholder of the carrier, the fund’s regulatory filing shows.

“The NPS’ decision is unfolding in a positive way for investors as the market sees today’s decision as helping improve Hanjin Kal’s corporate governance and value,” said Un Kyung-a, a senior analyst at Shinyoung Securities.

Hanjin Kal shares closed up 2.2 percent, after rising as much as 6 percent on the news, while shares of Korean Air fell 1.8 percent. The broader KOSPI index ended almost flat.

“We are concerned that the decision would negatively impact the company’s management operation. If the NPS requests to make changes, the board will discuss the topic according to the procedures,” Hanjin Group said in a statement.

The NPS’ fund management committee met on Friday to discuss whether to invoke the stewardship code to exercise its shareholder rights for both Hanjin Kal and Korean Air.

It “is preparing detailed guidelines to exercise shareholder rights in a fair and transparent manner for the sake of the fund’s profitability”, Minister of Health and Welfare Park Neunghoo said in a statement.

The move by NPS comes ahead of the expiry of Cho’s term as chairman of Korean Air in March.

Cho was indicted in October, adding to a string of woes at the country’s biggest airline group.

In April 2018, Cho’s youngest daughter Emily Cho was under a storm of public criticism for allegedly throwing a drink at a business meeting attendee. She was later cleared of all charges related to the incident.

The incident re-ignited public outburst toward the perceived unchecked behaviours of some family members of big business groups, or chaebols, leading to investigations of alleged wrongdoings by other family members.

Cho’s elder daughter, Heather Cho, made headlines over a notorious “nut rage” incident in 2014, when she demanded a Korean Air Lines plane return to its gate at a New York airport due to the way she was served nuts in first class. (Reporting by Heekyong Yang; Additional reporting by Hayoung Choi; Editing by Stephen Coates and Himani Sarkar)