Nearly 50 trillion won (approximately $35.97 billion) in funds is struggling to find investment opportunities, reaching a record high. Since last year, both private equity funds and venture capitals have been accumulating capital without deploying it.
According to the Financial Supervisory Service on June 25, the amount of capital accumulated by private equity funds without being invested reached 37.5 trillion won last year, marking a 33 percent increase of 9.3 trillion won from the previous year’s 28.2 trillion won. This is 9 trillion won more than the uninvested funds in 2021 when the venture boom subsided.
The venture investment market is also in a similar situation. According to the Ministry of SMEs and Startups, around 12 trillion won of funds remained unspent as of last year. This figure represents the amount of capital that has not been invested from the total funds established up to last year. The combined total of uninvested funds held by private equity funds and venture funds approaches 50 trillion won.
Last year, private equity funds raised an additional 11.1 trillion won, but only 1.8 trillion won, or 16 percent, was actually invested. The investment execution rate also dropped from 77.5 percent to 72.5 percent, reaching its lowest level since 2017. Although funds are being accumulated, they are not translating into actual investments.
The investment banking (IB) industry attributes the sluggish investments mainly to the high-interest rate environment that has persisted since the end of the COVID-19 pandemic and the decline in corporate valuations of investment companies. As company valuations continue to decrease, there is a tendency to adopt a wait-and-see approach rather than investing immediately, which slows down the flow of funds. While there is significant interest in artificial intelligence (AI), the lack of clear growth opportunities in other sectors is also believed to have dampened investment sentiment.
