The National Growth Fund, established with a total of 150 trillion won, is expected to bring transformative change to Korea's economy as capital deployment begins in earnest amid the growth of the artificial intelligence industry, experts said. The massive liquidity flowing into the private equity fund (PEF) industry could boost general partners' (GPs) investments in innovative industries, leading to productivity gains across the national economy. Policy capital spurring private investment is also expected to significantly stimulate domestic demand and job creation.
"Korea's future depends on advanced industries such as AI," Park Byung-gun, chairman of the PEF Management Association, said at the 15th Seoul Economic Invest Forum held at Shilla Hotel in Jung-gu, Seoul on Wednesday. "Policy support including the National Growth Fund will serve as an important touchstone for pioneering our future and enabling us to leap forward as an advanced nation."
He added that the 150 trillion won policy fund is expected to have massive ripple effects not only on the investment industry but on the broader economy.
The National Growth Fund will deploy 150 trillion won over five years, targeting 10 strategic advanced industries including AI. Various investment methods are available, including indirect investment, direct investment, infrastructure investment and lending, and ultra-low interest loans. Compared to the 2 trillion won deployed over five years during the Lee Myung-bak administration and the 20 trillion won New Deal Fund over five years under the Moon Jae-in administration, the scale is more than 10 times larger.
"The National Growth Fund, which is more than 10 times the size of previous policy funds, will be both an opportunity and a test to separate the wheat from the chaff for the PEF and venture capital industries," Park said.
Park noted that policy capital commitments would invigorate investment across the PEF industry while also enhancing expertise. He explained that large-scale, long-term capital flowing into high-risk, high-growth sectors such as AI would enable active PEF investment. He also emphasized that capital concentration in specific industries is increasing the need for GP differentiation and industry specialization strategies.
"Given the public nature of these funds, demands for performance and transparency will also increase," Park said. "Through this process, GPs' expertise is expected to strengthen."
Park diagnosed that corporate investment patterns are also changing due to AI industry growth and policy capital. As the government focuses on nurturing strategic advanced industries through the National Growth Fund, private sector investment in related fields is also becoming more active.
"In the past, most domestic carve-out deals aimed to improve financial structures during restructuring," Park said. "Recently, most are for preemptive business reorganization in preparation for expanding geopolitical uncertainties and rapidly changing industry trends."
Park predicted that institutional reforms including commercial law amendments would increase the complexity of PEF merger and acquisition transactions in the short term. However, he expected new opportunities could be seized in the medium to long term.
"GPs must evolve from return-supremacy investing to investment centered on supporting industrial growth and advancing governance," Park stressed.
Shin Hye-sook, vice president of Korea Development Bank (KDB) who leads the National Growth Fund's management, also urged capital market industry leaders to embrace their historic mission. She emphasized that the investment industry's responsibility has become greater than ever as capital flows are now directly linked to the nation's future.
"External uncertainties from high exchange rates and high oil prices have become permanent, and unprecedented competition for technological hegemony is intensifying," Shin said of current market conditions. "Let us work to firmly root domestic industries so our precious future assets do not flow overseas, and to enable new industrial sprouts to grow from those roots."
She made clear that KDB and the National Growth Fund would support asset managers executing such investments.
"KDB pledges full support to asset managers who share these values," Shin said. "We will create an ecosystem where policy-aligned PEFs dedicated to national industrial development are properly rewarded."
Shin also called for fundamental change in the PEF industry. "We must humbly accept society's frank assessments and be reborn in a new form that breathes together with our society," she said. "We must improve companies' fundamental value and chart a new path as a reliable execution partner for national industrial policy."
