South Korean VC Private Equity Assets Growing Rapidly
The numbers show just how powerful the Asian nation has become in these important asset classes. These are classic destinations for “patient capital” in which asset managers play.
South Korea-based private equity and venture capital assets under management hit a record $ 113 billion at the end of last year, almost doubling in two years, according to figures from Preqin.
Alternative investments such as venture capital and private equity have exploded around the world because, as relatively illiquid assets, they can offer higher returns than listed stocks and government bonds. Wealth managers, and others, have pumped money into these areas. Companies in some countries are also staying private longer, delaying or even not bothering to go public.
“The South Korean private equity industry is now of a reasonable size compared to the general equity market. And compared to other APAC markets, private equity in South Korea remains relatively mature, with strong returns and fundraising. If the Korean government adopts a significant reform of corporate governance, the chaebols [large
family-owned business conglomerates] represent yet another untapped opportunity for private equity investors, ”said Cameron Joyce, vice president, Research Insights, Preqin.
Buyout strategies account for 41% of total assets under management, which is relatively high for the Asia-Pacific market, and South Korea-based buyout funds raised a record $ 17 billion in 2020, said the society.
As a mature economy, South Korea is expected to experience increased buyout activity, with additional investment opportunities due to the government’s plan to reform chaebol governance, eventually allowing large conglomerates to establish funds. venture capital, the company continued.
Disruptive technologies continue to drive the Korean venture capital ecosystem, which recorded a total of 871 deals in 2020, down from just 308 in 2017. The total deal value has thus increased, reaching $ 5.3 billion in 2020 vs. $ 3.1 billion in 2017. vibrant venture capital ecosystem, which has produced several unicorns in the tech space. (“Unicorns” are private companies worth $ 1 billion or more.)
The largest currently is Seoul-based mobile fintech platform Viva Republica, which reached a valuation of $ 7.4 billion following its latest investment in June 2021.
A report by global consultancy McKinsey & Co said private equity funds outperformed other private market asset classes from 2008 – the year of the financial crash – to 2020. (See graph below .)
1, Fund performance evaluated using an internal rate of return calculated by aggregating the performance of funds 2000 to 2017 over the period 2000 to 2020. Some data is not available for certain periods.
2, The internal rate of return for 2020 is nine months (YTD, Q3 2020).
Source: Buriss, McKinsey & Co