Interview with Kim Sung-hwan, President of Korea Investment & Securities
On Next Year's 4 Trillion Won Target: "I Want to More Than Double It"
"We may become the public enemy of banks, but our investment base is set at a much higher level than bank interest rates. Immediately after launch, we have secured our year-end target of 1 trillion won in investment assets. Next year, I want to increase this by more than double, not just to 4 trillion or 5 trillion won."
Kim Sung-hwan, President of Korea Investment & Securities, met with reporters at the Yeouido headquarters on December 18, when the company launched the country's first Integrated Investment Account (IMA) product. He stated, "The IMA is not just a new product. It is an institutional mechanism that allows securities firms to secure funds in a long-term and stable manner and channel them into Korea's real economy and corporate finance."
Kim Sung-hwan, President of Korea Investment & Securities, is interviewed by reporters at the Yeouido headquarters on the morning of the 18th, when the country's first Integrated Investment Account (IMA) product was launched. Korea Investment & Securities
Korea Investment & Securities, which was jointly designated as the first IMA operator eight years after the system was introduced, unveiled its first product on this day-a closed-end, performance-based product with a two-year maturity. The IMA is a principal-guaranteed, performance-based product in which the securities company pools customer deposits and invests them in corporate finance assets such as venture capital, returning profits to customers based on investment performance.
Kim explained, "The initial product will focus on domestic acquisition finance and corporate loans as core assets, while enhancing profitability through high-yield assets such as Business Development Companies (BDCs). Developing Korea's capital market and supplying venture capital is a critical task of our time."
The year-end target for the first IMA product is set at 1 trillion won. The publicly announced goal is to supply at least an additional 4 trillion won by next year. However, Kim emphasized, "That is actually a modest figure; I want to increase it by more than double, not just to 4 trillion or 5 trillion won." Regarding the launch of the second and third products, he said, "They will be released continuously-about once or twice a month." After the initial product is firmly established, the company plans to gradually introduce medium- to long-term, growth-oriented products targeting customers with a more aggressive investment profile.
During the interview, Kim did not specify an exact figure when asked about expected returns, which investors are most curious about, but he expressed confidence, saying, "The target return is not low. It is much higher than what banks offer." For the first product, the benchmark return is set at 4% per year. If returns exceed 4%, 60% of the excess goes to customers and 40% to Korea Investment & Securities. He added, "Our investment base is set at a much higher level than bank interest rates. The IMA cannot be run at just 4%. There must be a plus alpha to cover our (Korea Investment & Securities') costs, profits, and additional customer gains."
The IMA business is structured so that more than 70% of the funds raised are allocated to corporate finance, in line with the system's purpose of supplying venture capital and revitalizing corporate finance. When asked about industries and selection criteria, Kim replied, "All corporate finance handled by the investment banking division will be reflected. The IMA Investment Review Committee (IMA RMSC) will only handle investments that have been thoroughly discussed and decided upon regarding industry, investment amount, duration, risk, and returns."
The allocation between overseas and domestic assets has not been finalized. Kim explained, "It would be ideal if most of the assets were domestic, but to achieve the target returns, we need to include global products to raise the baseline. However, it is unrealistic to allocate half to global assets. Depending on performance, we may add more global products as needed, or if returns are sufficient, we may not include them at all." He added, "We will adhere to the rule of allocating 25% to venture capital. Korea Investment & Securities already maintains a company-wide venture capital ratio of over 25%." Venture capital investments will be limited to domestic assets.
Kim, who said he would immediately subscribe to the first product after the interview, commented on competition for market share with Mirae Asset Securities, which was also designated as an IMA operator: "What matters now is not market share competition, but establishing the system and earning customer trust. As the first operator, I believe it is important to play a leading role in productive finance."
He also reaffirmed the company's goal to surpass Nomura Securities and become "Asia's top." Kim said, "The IMA business will be a key pillar for Korea Investment & Securities to leap forward as a global investment bank. The IMA is not the end. We were the first in Korea to launch promissory notes and the IMA, and we will continue to strive for new firsts. That is what will help Korea Investment & Securities become number one in Asia."
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