Translation to English

“More cash than you need is dead money. Make profits from high liquid global asset investment.”

Gap-seong Ahn for Maeil Business Newspaper
January 18, 2019

Interview of Ohad Topor, CEO of TCK Investment Management 

Among Wall Street traders, dead money is a term that loosely refers to money or investments that do not increase in value or generate profits. According to chaebul.com, a website specialized in information about Korean conglomerates that conducted a survey of 2,194 listed companies in Korea as of the end of March last year, there are 47 listed companies with more than KRW1trillion in cash. The total amount of cash held by these companies was KRW158.94trillion, up KRW11.56trillion(7.8%) from the previous year. 

There would be no reason to hesitate with putting this money to good use if these companies had a way to make appropriate returns by utilizing these cash assets. The Outsourced Chief Investment Officer(OCIO) market, which started from the pension fund investment pool system introduced in 2001 for public institutional funds management, has grown to the level of KRW90trillion last year. This can be seen as a reflection of these worries of corporations about their cash asset management. 

In November last year, global investment advisory TCK Investments held a forum with the Korea Association for Chief Financial Officers(KCFO) and suggested the need for efficient management of corporate surplus funds. Established as Korea's first independent family office in 2012, TCK Investments received attention in March last year by recruiting Hwang Young-key, former head of the Korea Financial Investment Association, as a senior advisor. 

Co-founders of TCK Investment are outstanding business figures. Ohad Topor is an investor and entrepreneur from the Topor family which is a well-known Israeli family. He established the company with Howard Marks, co-founder and co-chairman of Oaktree Capital, one of the leading asset management companies in the world. TCK Investment is known as a company that provides customized asset management services mainly for HNWIs and corporates. 

Mr. Hwang said at the forum last year, "In times when the economy's prospects are bleak, we should minimize risk by investing excess money in global markets, and not just in Korean won-denominated assets," adding, "CFOs should not only manage liabilities and finances but also manage excess cash." 

Biz Times of Maeil Business Newspaper met with Ohad Topor after the forum and asked about the excess cash management plan of corporates and an outlook for the market. Mr. Topor is also interested in innovation as he is the senior advisor of the Korea Israel Innovation Center, established in partnership with his spouse, Jasmine Topor. Below are the interview answers. 

-Firms may be subject to insolvency by paper profits if they do not consider working capital or liquidity. Isn’t it safe to accumulate as much cash as possible, rather than investing excess cash during a recessionary period? 

▶This is one of the most frequently asked questions by businesses. As experts such as Professor Chae Jun of Seoul National University recognize, there is a reasonable amount of excess cash to be maintained by a company. But more cash assets than necessary is dead money. 

In the short term, it is better to leave working capital in cash or deposits, but it is desirable for Korean companies to invest in as many liquid assets as possible. Highly liquid assets refer to assets diversified at a global level, such as dollar-denominated stocks or bonds, rather than cash or deposits that do not generate returns. 

A crisis can come at any time, so it is best to be prepared for such risk. No one can predict a crisis, but if you prepare a globally diversified portfolio, you can reduce losses and make good returns. The investment portfolio we propose is assets that can be liquidated in a matter of days. 

- Most companies have managed funds for business operations such as anti-corruption and risk management, unless they are managing it in anticipation of large M&As. Why should companies pay attention to the management of excess cash? Is there a golden rule to excess cash investment? 

▶Corporate profits also skyrocketed in the past when Korea was growing at a high rate. In the past, CFOs had to manage capital and liabilities to ensure smooth growth. Today, however, corporate Korea sees higher profits but slowed growth. It needs to use the excess cash to generate additional gains. 

Companies like Amazon have settled over USD40billion(approximately KRW44.9trillion) in M&A deals in 2017 alone to maintain a competitive advantage. Since Korean companies have become global corporations, they should engage in global M&A. 

If companies tie all their cash to Korean won assets and make investments in illiquid assets, they could lose out on future growth opportunities. Globally diversified investments can enable the company to be ready to buy into a potential M&A and also deal with the issue of exchange rate risk, even if a global financial market crisis were to occur. 

- In your past interviews, you advised Korean retail investors to increase their dollar assets by more than 30%. Should Korean companies make such investments? What are your investment principles and what assets do you think have recently been undervalued? 

▶At this time, it would be good for individuals to hold 50% of their remaining assets in dollar assets, excluding living expenses for 3 to 5 years. Although 50% would be recommended for companies as well, their ratio may differ depending on the industry they are in. Diversification and risk management are the most important investment principles. In times of crisis, there is always an opportunity. Co-founder Howard Marks said, "We cannot predict but we can prepare." Rather than talking about which asset is undervalued I would prefer to say that the dollar is relatively less expensive given current risks. The dollar is trading at an average of the past 20 years, and I do not think there will be a crisis that would disrupt this position. 

- What is your future business plan? 

▶TCK Investments is also helping clients find innovative sources in the Israeli market through the Korea Israel Innovation Center. Many Korean clients are already investing in Israeli technologies and M&As. We intend to continue providing comprehensive solutions that will provide differentiated asset management services through globally diversified investment to both corporate and individual investors, and provide innovation to Korea.