Deep Thoughts By Chin Young-Wook

Ashby Monk

The Korea Times is clearly making the most of an interview it did with Chin Young-wook, the President and CEO of the KIC. Just this morning, they’ve published three separate articles from their time with Mr. Chin (see here, here and here). But I don’t blame them, as Mr. Chin has been running the KIC since 2008. This means that any time he says something publicly, which doesn’t seem to be that often, we should pay attention.

And some of this interview was quite fascinating. For example, I was quite interested to hear some of his ‘deep thoughts’ on the benefits of scale for SWFs and why the KIC should expand in order to capitalize on these benefits:

“Taking all things into consideration, there is an urgency for KIC to expand the size of assets to form an optimal investment portfolio, snap up opportunities in deal sourcing and sharpen up the competitive edge of Korea in the global money market.”

“For SWFs, deal sourcing is most important and size matters most in that regard. We have built a network with major SWFs. But without expanding the asset size, it will be difficult to find an excellent opportunity.”

“We are now receiving invitations from the premier league. At present, the areas that require most improvement are investments in energy and resources. We are seeking to expand exposure in these areas.”

“It is hard to tell the exact number as there are many factors to be taken account. However, I believe that it should be at least $100 billion from the long-term perspective to join the so-called (SWF) premier league.”

In short, Mr. Chin wants to add (roughly) another $50 billion to the KIC to bolster the fund’s status in the “premier league of SWFs”, which, in turn, will generate a variety of investment opportunities unavailable to smaller funds. I agree with Mr. Chin that size has its advantages; there are obvious economies of scale, but there are more nuanced benefits, such as a fund’s transition from being just another LP to being a legitimate “investment partner” with other investors and asset managers.

And since we’re doing ‘deep thoughts’ today, I’m inspired to write a quick syllogism based on Mr. Chin’s comments:

  1. Large institutional investors have a competitive advantage over small institutional investors.
  2. Sovereign funds are the largest institutional investors in the world.
  3. Therefore, SWFs have a competitive advantage over all other institutional investors in the world.

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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