Ham Yong-il, deputy governor of the Financial Supervisory Service, said on the 12th, “There are concerns that institution-exclusive private equity funds (PEFs) aimed at relatively short-term revenue generation could undermine the long-term growth potential of corporations.”
On that day, Deputy Governor Ham attended a meeting of chief executive officers (CEOs) from 12 PEF management firms held at the headquarters of the Financial Supervisory Service in Yeouido, Seoul, and noted, “There are various perspectives on PEFs.” The event was organized to discuss the appropriate roles and responsibilities of PEFs in the context of financial capital's dominance in the industry.
Attendees included H&Q, Han & Company, MBK Partners, Stick Investment, IMM Private Equity, SKS Private Equity, VIG Partners, UCK Partners, SkyLake, Stonebridge Capital, JKL Partners, and Korea Corporate Governance Improvement (KCGI).
Deputy Governor Ham stated, “Since the introduction of the PEF system in 2004, the pledged capital across more than 1,100 PEFs has reached approximately 140 trillion won, indicating that the domestic PEF industry has experienced remarkable growth.” He added, “Especially in the domestic mergers and acquisitions (M&A) market, PEFs have established themselves as key players for corporate restructuring and venture capital supply, and they have provided important alternative investment options to institutional investors through various operational strategies, such as mezzanine investments and private loans.”
He further assessed that the growth of PEFs has not only heightened interest in exercising shareholder rights and promoted market efficiency but has also significantly contributed to the development of capital markets and the financial industry by continuously contemplating improvements in corporate governance.
However, the deputy governor noted, “There is also a perspective that PEFs managing large-scale third-party funds in areas lacking supervision can exert considerable influence on the market.” He added, “As PEFs increasingly impact corporate governance, it is meaningful to initiate discussions on their appropriate roles and responsibilities from the perspective of ‘the dominance of financial capital, such as private equity funds,’ which differs from the existing discussion on the separation of banking and finance.”
Deputy Governor Ham emphasized, “The overarching principle that PEFs should operate based on autonomy and creativity according to market principles remains unchanged,” and expressed hope for productive discussions with authorities on the topic of financial capital's industrial dominance for the healthy development of PEFs in the long term.
The PEF CEOs attending the meeting conveyed to the Financial Supervisory Service, “The PEF sector has played a role in improving corporate governance and enhancing shareholder value for the advancement of capital markets, and we will continue to fulfill our responsibilities.” They also stated, “Despite the uncertain domestic and international environments, it is essential to consistently pursue the challenges facing the capital market that authorities have been promoting, such as value enhancement.”
The PEF side mentioned that there is a regrettable aspect in the general perception of PEFs forming negatively around short-term profit-seeking and hostile M&A. They stated, “We will interpret recent criticisms of certain unhealthy business practices as issues of trust for the entire sector and will continue our improvement efforts.”