Translation to English

Koreans Approach Stock Investing with a Short-Term Trading Mindset... Building Wealth is a Game of Patience

TCK Investments’ Chairman Ohad Topor Invests for the Ultra Wealthy

Hyun Jeong Bae for Joongang Sunday
June 29, 2024

How do the wealthy manage assets in the millions and tens of millions? With various assets such as cash, real estate, stocks, and bonds, direct management of these assets can be challenging. Therefore, many opt for personal asset managers, asset management services offered by banks, or professional asset management companies. There are several banks and financial companies in Korea that provide these services.

Among them, some asset management companies cater exclusively to the ultra wealthy, sometimes referred to as the “super-rich.” Due to their exclusive clientele, these companies are not widely known to the public. TCK Investments (TCK) is one such prominent example. As a global investment firm, TCK offers "multi-family office" services in Korea, managing and investing the assets of multiple wealthy families. On average, they manage assets of $40 million (approximately 55 billion KRW) per client.

Ohad Topor, the founder of TCK and a renowned global investor, introduced the asset management practices of the European ultra wealthy, such as nobility and aristocrats, to Korea. Born in Israel, he established TCK in 2013, inspired by the advisory and investment philosophy of Howard Marks, often referred to as a "legend of value investing on Wall Street." Topor operates family offices in Korea and the UK. He studied economics at Tel Aviv University in Israel and earned an MBA from Stanford University in the US. Subsequently, he worked for 23 years as an investment manager at firms like Square Capital, headquartered in London and Paris. Given his lack of prior ties to Korea, one might wonder how he came to establish a family office here and how he manages the assets of Korea's ultra wealthy. We recently met Chairman Topor at TCK's office in Korea to learn more.

Korea’s Super-Rich Have Too High a Proportion of Assets in Korean Won

Q. How did you come to establish TCK in Korea?

A. "While studying in the United States, I became acquainted with Korea and got to know key figures in Korea’s business, political, and financial sectors. Through this process, I recognized the boundless potential of the Korean people. Korea has already achieved unparalleled economic growth at an astonishing pace, which is truly awe-inspiring. I hope TCK can play a role in the development of Korea's capital markets."

Q. You also have an office in the UK.

A. "Many global investment firms merely have branches in Korea, but we are focused on Korea. Although I travel between London and Seoul, I spend more time in Korea. I've moved here, and my two daughters attend school in Korea."

Q. How many clients do you currently have?

A. "We have fewer than 30 clients. Due to the highly customized nature of our asset management services, we selectively manage up to 30 clients. Among our clients, there are both individuals and corporations."

In fact, Topor comes from a family of innovators in Israel. His father is an engineer and patent holder who developed the computer "hibernation (sleep mode)" function. Most of his family, including his two younger brothers, work in the technology and innovation sectors.

Q. Why did you choose the field of asset management?

A. "I believe that asset management has unique strengths that can rival even those of the high-tech industry. That's why I studied macroeconomics and specialized in asset allocation. I find this field to be very attractive. There was also an aspect of my family wanting me to manage our family's assets (laughs). Since 2013, I have been working for 'more families' in Korea and have been achieving more than twofold returns."

Q. What is the exact investment return in Korea?

A. "TCK uses the investment methods of successful global university endowments as a benchmark. From 2013 to last year, the cumulative return for our Korean clients was 136.3%. It’s significant that we can more than double assets through very safe and proven investments."

Q. Where are the assets of Korean wealthy individuals being invested?

A. "We focus on investing in excellent financial assets abroad, including U.S. dollars, stocks, bonds, and commodities in the U.S., Europe, and other countries. Currently, the largest holdings are in major U.S. tech companies. Through a balanced portfolio of global stocks and bonds, our goal is to double assets every ten years. Additionally, we pursue excess returns through venture capital, private equity, and alternative investments, aiming to triple assets every ten years."

Q. How do Korean wealthy individuals differ from those in other countries?

A. "Aside from the issue of inheritance tax, there isn't much difference in asset management. However, a problem with Korea's super-rich is that they have an excessively high proportion of assets in Korean won. Korea could be considered to have a relatively smaller economy, accounting for only 1.4% of the global market. When a shock occurs, it is inevitably exposed to significant volatility. Although I am from Israel, more than 90% of my family's assets are held abroad because Israel is also a relatively smaller economy like Korea."

Q. What should be done then?

A. "Citizens of small economies must diversify a portion of their assets into U.S. dollar-based stocks or bonds. This way, they can ensure safety and higher returns. For instance, holding Korean stocks since 1990 would yield a 4x return, but investing in global stocks and bonds during the same period could achieve more than a 20x return. Concentrating on real estate and holding assets in won could lead to a decline in both personal and national wealth compared to other countries over time."

Q. What effective investment methods would you recommend for individual investors?

A. "For novice investors, it is better to invest broadly in all global stocks through global funds or concentrate on one or two areas where they feel strong, such as the U.S. I recommend investing in broad indices like the S&P 500."

Q. How do you view the Korean stock market?

A. "Korean stocks are undervalued and have a bright growth outlook. TCK is also increasing its allocation in Korean stocks. The value-up program has significantly enhanced growth potential, as evidenced by foreign inflows (a net purchase of $13.5 billion in KOSPI and KOSDAQ) since early this year. However, for effective change, various reforms are needed in corporate governance, regulations, and taxes, particularly easing inheritance tax. Without strong or effective reforms, foreign investors might reduce their allocation in Korea, causing stock prices to fall."

Chairman Topor warned against the impatience of Korean investors stemming from the 'bballi-bballi' (hurry-hurry) culture. He expressed concern over the pursuit of quick results using excessive leverage. "Building wealth is a game of patience," he emphasized.

No Major Changes Expected Despite U.S. Rate Cuts, Election Remains a Variable

Q. What do you mean by 'a game of patience'?

A. "Korean investors are very active in investing in highly risky leveraged ETFs for quick gains. However, there are very few successful cases of individual investors investing in single companies, single assets, or cryptocurrencies, especially using leverage. It might sound boring, but holding a diversified portfolio of stocks over the long term is the safest and most proven way to build wealth. Warren Buffett has a famous quote, 'The stock market is a device for transferring money from the impatient to the patient.' For example, suppose you consistently invest 1 million KRW every month in a global index and achieve an average annual return of 7%. After 30 years, the cumulative value would exceed 1 billion KRW, of which only 30% is the principal investment. The remaining 70% is profit. This perfectly illustrates how the stock market transfers money to patient investors, as Buffett said."

Q. What factors should we pay attention to in the second half of the year?

A. "There is a lot of speculation about when the U.S. will start cutting interest rates. However, the timing of rate cuts should not be the main concern for investors. Even if rate cuts begin, the investment environment will not change suddenly. The Federal Reserve may start lowering rates in September or November, but high-interest rates will persist for a while. I expect the U.S. benchmark interest rate to be around 3.5% ~ 4% next year. This means we won't return to the low-interest era. Therefore, returns on real estate and bonds may be lower than expected. U.S. commercial real estate has already plummeted, and even if rates are cut, this situation won’t change immediately. More attention should be paid to the U.S. presidential election. If former President Donald Trump is re-elected, tariff issues with China will resurface. This could lead to a rise in the U.S. dollar. During the U.S.-China trade war from 2018 to 2019, the value of the dollar rose by 16% against the Korean won until the two countries reached a truce. While it's impossible to predict the outcome of the U.S. election, it's important to remember that holding dollar assets is the most effective way to hedge against the risk of increased tariffs."