Castling secures Korean separate account

The Seoul-based startup investment firm has secured $80m from a domestic museum endowment to invest in private equity funds globally.

Newly-formed Castling Investment Group has established an $80 million customised separate account for a museum endowment in Korea, according to Steve Kim, chief investment officer at the Seoul-based investment boutique. 

The commitment is the firm’s first as it readies to launch its debut co-mingled vehicle in 2014. The fund will assess opportunities globally and is likely to target between $500 million and $800 million. 

Kim told Private Equity International that the Korean LP allocation will be used to invest in private equity opportunities globally, making commitments of between $5 million and $20 million to GPs raising second or third vehicles. The firm is sector agnostic, but Kim says one aim is to reduce the J-curve effect for its investors and this is easier to do by investing with GPs managing distressed-focused vehicles or secondaries funds. 

The name of the museum endowment was undisclosed, but Kim revealed it is investing in private equity overseas for the first time, having previously been heavily overweight in domestic stocks and real estate. 

Korean institutional investors are taking steps to increase their exposure to offshore alternatives due to low interest rates and slow GDP growth at home.

“The issue with Korean institutions today is they are heavily invested in domestic stocks and domestic real estate. There is definitely a push here to broaden their alternatives portfolios and there is a huge push to diversify internationally,” Kim said.

However, many lack the resources to make commitments to overseas GPs, delegates heard at PEI’s recent Global Alternative Investment Forum in Seoul. 

There is definitely a push here to broaden their alternatives portfolios and there is a huge push to diversify internationally

Steve Kim, chief investment officer, Castling Investment Group

“When starting to build an alternatives platform, put together a broad blueprint from the board or government agency overseeing your institution and agree on a five-ten year plan,” James Ahn, managing director at Clayton, Dubilier & Rice, advised on a panel. “You’ll have turnover, so mitigate that risk by putting together a longterm plan and getting support from multiple stakeholders. Only a few institutions have done that.”

Kim agrees, saying, “The challenges for a lot of institutions are two-fold: they don’t have the resources internally to speak English or have offices abroad to screen opportunities. Secondly, a lot of institutions have restrictions placed on them to invest abroad and they are just now changing those policies.”

Castling is currently licensed in Korea as an investment advisory boutique, but is planning to register as an investment manager, allowing it to manage co-mingled vehicles like a fund of funds. The firm now has $80 million in assets under management and was set up by investment professionals from Pathway Capital Management, Horsley Bridge and Bank of America Merrill Lynch.