As a nation, South Korea arrived relatively late to the private equity party, only opening its first fund in 2004. Today, it is a strongly performing part of the national finance industry, and the nation’s government is actively looking to push further development of the PE marketplace so it becomes a long term corporate finance source, reports the Financial Times.
In the 10 years since the government at the time brought in regulatory measures aimed at boosting the creation of national buyout funds, 230 PE funds have been created. The total value of assets managed by South Korean funds stands at $39billion says the Financial Services Commission. Seoul is looking to increase PE activity even further by relaxing the existing regulations that ban investing in various sectors, including real estate and stocks.
This particular move will be watched with great interest in Europe and in the United States, where there are concerns regulations in these areas are putting pressure on the economy by decreasing the PE investment opportunities that are available. One of the big trends in South Korea is that the large deals inside the country are being done by national funds, whereas in the past large multinationals had been responsible for the bulk of the deals.
This trend has helped the government boost the PE markets in the country, particularly as many multinationals are looking at the bigger opportunities in Japan and China. Despite being a renowned technology centre, South Korea has suffered from stagnant economic conditions in recent times. The country is known for being a particularly difficult place for overseas funds, especially when it comes to exiting an investment, which has been another contributing factor in multinational funds looking elsewhere.
While it is positive for South Korea that they are looking to build the PE market within their country and they suggest that 2014 is going to be a strong year, it is unlikely that without further reforms to make their economy and PE marketplace more favourable for foreign investment that it will grow into a truly global hub.