SEOUL – James Kim is offering international fund managers the “secret button” they need to press if they seek to access one of the region’s richest and most promising – but least transparent – capital markets.
“The Korean market is pretty transparent to Koreans, but our standards are different from those of global regulatory practices, and we have different cultures and organizational structures,” Kim – whose Korean name is Kim Jong-hoon – said.
“A lot of foreign managers don’t know what steps they should take. You have to know the passcode – the secret button – to get into this market.”
That “secret button” is what Kim, 53, offers in the form of an all-new, dedicated market information service launched in Seoul this month. But before detailing what he offers, he made clear why South Korea represents a rich and rising, but under-reported, fund pool.
“Korea is one of the biggest capital-exporting countries and will continue to be for the next 20-30 years down the road because of its fast-aging population and their pension funds,” he said. “The National Pension Service is the world’s third-largest, it has US$700 billion in assets, roughly, and they have been doubling assets every seven years.”
South Korea has little choice but to export huge chunks of that capital, as the size of local funds seeking returns has outgrown the scale of the local market.
“Korea is too small to accommodate this huge pension money,” Kim said, adding that it has to look over distant horizons. But to do that, “Korean institutional investors need to be able to see the entire universe, rather than the universe created by agents sitting in Korea.”
Ditto, foreign fund managers may want to lure South Korean money, but do not necessarily have the contacts or information about tenders. Nor do they have the local knowledge necessary to sort the wheat from the chaff. It is also unlikely that they have the ability to navigate the labyrinth represented by the Korean language.
“Entry barriers are too high for foreign players – they need to hire a credible agent or broker – and that will cost them a lot without knowing if they will be successful or not,” Kim said. “I want to lower that barrier.”
The vehicle Kim offers to bulldoze that barrier is Capital Connect.
The company is the end result of a range of experiences and ideas Kim has garnered working in banking, accounting, law, tax, investment banking, venture capital and private equity over four decades on three continents.
The Seoul native survived the 1997 Asian economic crisis before spreading his wings to Paris, New York and Hong Kong before launching Capital Connect on home turf this month.
Having graduated from the elite Seoul National University – the Harvard or Oxbridge of South Korea – with degrees in Business Administration and Finance, Kim began his career at Korea Long Term Credit Bank in 1994.
At the privately-run KLTCB, Kim and his team worked on infrastructure projects, including the Incheon Airport toll expressway, providing long term finance. All was well until the world came crashing down in late 1997.
The Asian financial crisis was a pivot moment for the South Korean economy, reshaping not only South Korea’s corporate sector, but also its financial landscape. Being a small bank without a savings base had no future. Amid a wave of consolidations, KLTCB merged with one of the country’s main retail banks, KB.
At the center of the maelstrom, Kim moved to Samjong, the Seoul branch of global accounting firm KPMG, in 1998. There, his eyes were opened.
“The Korean banking sector was so primitive, nobody knew how to deal with the crisis,” Kim said. ”At Samjong I was involved in the sale of bad loans and our clients were Goldman Sachs and Lone Star and Jeil Bank, which became Standard Chartered Bank Korea.”
He was awed by the practices and skills the foreign players brought to the table.
“I got to see how these guys looked at deals and structured deals,” Kim recalled.” I was privy to all those transactions, and it kind of reinforced my desire that I should study more and have exposure to global finance.”
He subsequently relocated to the US, the educational mecca for countless South Koreans. Having studied law in Cincinnati, Kim briefly worked at a legal firm, then assisted a friend with an IPO in Paris before returning to school yet again, to study tax in New York.
With his skillset broadened he landed a job with JP Morgan Chase.
But he was unhappy doing tax work – “reading all that little code hurt my eyes!” So when a former KLTCB contact working at Australia’s Macquarrie Group called Kim with a job offer, Kim returned to Seoul in 2007 “without hesitation.”
Kim expanded his experience as an investment banker before becoming head of Macquarrie’s Private Placement Group. That entailed raising money globally for funds and projects, work that would incubate the seed idea that would eventually become Capital Connect.
When another crisis rocked the world in 2008, Kim moved to Korea Investment Partners, the country’s biggest VC, to form a new PE arm. He did that, but found the regulatory environment restrictive.
Taking the plunge, Kim spun off his own fund, EQ Partners. Times were good and within six years, Kim had expanded the assets under management from $50 million to $1.8 billion. Investments were global: Brazil, Canada, China, Pakistan and elsewhere.
In 2018, Kim sold EQ Partners to KIC and founded a new venture, Tiandi Partners (literally, “Heaven, Earth, Man.”)
“It is a kind of family office-type business model, an investment vehicle,” Kim said. “I decided not to pursue the PE business because I wanted to go long term. When I made an investment, always in the back of mind, was the thought that I would have to exit – there was no long-term vision, just maximizing returns in 3-5 year periods.”
Having spent his career in finance, Kim made the decision to craft an entirely new business from the ground up.
“That means growing people, cultivating a culture, educating and training people, bringing in talent and expanding into different markets,” Kim said. “This takes different skill sets to a PE manager.”
The result is Capital Connect. The concept is to link Korean liquidity providers to overseas fund managers.
The key to Korean capital
At present, the company offers two services.
The first is in-depth market information, provided largely by The Bell (“thebell”), South Korea’s leading specialist financial information provider. Based in Seoul, the outlet boasts 80 fully dedicated journalists churning out paywalled, Korean-language content on local capital markets.
In partnership with The Bell, Capital Connect runs translated stories covering the activities of South Korean institutional investors, deals and M&As, and leading personalities in the sector. A range of related stories from other, less specialist media, such as the country’s newswire, Yonhap, are also offered.
The second arm of Capital Connect is an inquiry service. Interested subscribers, having read the stories, can email with queries. Staff from Capital Connect or The Bell are on hand to respond.
“In Korea, there is some information that locals can easily find, but that is difficult for foreigners,” Kim said. “Also we can verify information – that is very easy for us to do, but very difficult for someone in New York or London to do.”
Kim anticipates adding a third arm in the near future, a mandate service. When institutions seek to invest in a certain category, they put out tenders to overseas managers. But in South Korea, this information is not centralized anywhere, and most of it is in Korean. This makes it hugely difficult for foreign managers to access.
The business operates through a three-tier subscription service: Free, Basic Plus and Premium.
Capital Connect is based in a 19th-floor office in downtown Seoul’s Gwanghwamun central business district with views over the city’s original medieval palace and the presidential Blue House.
Inside, there are three editorial staff with professional backgrounds at Bloomberg, Dow Jones and Reuters, backed up by an Asia Times editor. Hence, Capital Connect is a partnership with Asia Times.
The key differentiator is the capability it offers to answer bespoke queries posed by subscribers.
“If you have information that has value, people will be willing to pay for it,” Kim said. “Our way of looking at this is different: Instead of just providing information, we try to answer the questions people have about Korean capital markets.”
Over the long-term, Kim wants Capital Connect to become the service for those who want to access Korea’s stockpile of cash.
“We would like to become a platform for anyone who is trying to raise money from the Korean market: They can get that capital through us,” Kim said.
And despite the fecundity of South Korean markets at present – at the time of writing, the won was at a 30-year high, while the main stock board was at a record high – the space is not exactly crowded.
“We have no competing services in Korea right now,” Kim said.
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