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Analysis on Korean Fund of Funds  

KANG, Won (School of Business, Sejong University)
Publication Information
Asia-Pacific Journal of Business Venturing and Entrepreneurship / v.14, no.6, 2019 , pp. 1-9 More about this Journal
Abstract
Since 2005, Korea Venture Investment Corp. (KVIC) has been managing Korean Fund of Funds (KFoF) which helped greatly the domestic venture capitals create their private funds. Its contribution, however, is not limited fetching the pump. When KFoF decides to invest in VC funds, it demands very strict rules the VC funds need to follow before and after their investments in private equities. Whether this tight control of investments does hinder GPs' creativity or rather enhance GPs' transparency and professionalism is an open question subject to empirical tests. If KFoF is only fetching the pump, and neither fund size or time horizon improves VC funds' return rates, then KFoF's involvement in VC funds should not be positively related to VC funds' return rates. If, on the other hand, KFoF harms GPs' creativity, KFoF's involvement should be negatively related to VC funds' performances. Still, if KFoF promotes GPs' transparency and professionalism, its presence in VC funds should positively affect the returns earned by VC funds. Even when KFoF only got to get quality VC funds because those GPs good enough to stand up to the tight conditions set forth by KFoF, the empirical implication will yield the same results. In this article, empirical tests are carried out using the data provided by Korea Venture Capital Association. The VC funds formed and liquidated from 2000 to 2018 are selected for the tests. The results show that VC funds with the presence of KFoF exceed VC funds without KFoF in returns, which supports the hypothesis that KFoF enhances transparency and professionalism of VC funds.
Keywords
VC; Fund of funds; GP;
Citations & Related Records
Times Cited By KSCI : 1  (Citation Analysis)
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