The Korea Financial Investment Association announced on Dec. 28 that the net asset of private equity funds (PEFs) in Korea broke the 200 trillion won mark by a margin of 241.6 billion won on Dec. 22, about 11 years after the introduction in the country. The amount increased by approximately 30 trillion won from a year ago, too.
A PEF is defined as a fund for institutional investors or a group of 49 or less people to invest in securities, bonds, derivatives, alternative products and is different from public funds in that the latter are for unspecified people. PEFs are subject to less strict regulations and more leeway is given to them. Public funds have to satisfy certain ratios with regard to specific investment targets, leverage ratios and so on, but PEFs are free from such rules and thus can be more flexible in coping with market situations and concentrate investing on more profitable assets.
In addition, a PEF can be raised in a couple of days, while raising a public fund takes 15 to 20 days, including filing a report to the Financial Supervisory Service.
“PEFs are relatively smaller in size than public funds and can be invested in promising targets such as hedge funds and mezzanine funds in a more timely and flexible way,” said Han Seong-hee, a private banker at the Apgujeong WMC Center of Hyundai Securities, adding, “These days, an increasing number of wealthy investors searching for moderate risks and moderate returns of about 7 percent to 8 percent a year are focusing on PEFs that allow investment strategies, targets and periods to be designed to suit their needs.”