Korea’s Hahn nears $2.5bn final close on latest fund

Hahn & Company III is expected to close by the end of June and has already amassed $2.1bn, US pension documents show.

Hahn, one of South Korea’s largest private equity firms, is eyeing a final close on its latest fund and has added several US institutional investors to its LP base.

The Seoul-headquartered firm expects to close Hahn & Company III on $2.5 billion by the end of June, according to a document from the Pennsylvania Public School Employees’ Retirement System published on 23 May.

Fund III had a $1.85 billion target and has already collected $2.1 billion in commitments, according to the documents.

This is a new relationship for PSERS, which is committing $150 million to the vehicle. Of this, the US pension will commit a minimum of 20 percent to Hahn & Company III-S, a co-investment fund, according to the documents. The co-investment fund has raised $500 million to date, a source familiar with the fundraising told Private Equity International.

Fund III will have a 2 percent GP commitment and will target around eight equity platform investments in the range of $150 million to $500 million.

The mid-market private equity firm was founded by Scott Sang-Won Hahn in 2010. Hahn previously spent 15 years at Morgan Stanley and built the firm’s practice in South Korea.

Hahn’s Fund I closed on $750 million in 2011 and Fund II closed on $1.9 billion in 2014, according to the firm’s website.

Fellow state pension Pennsylvania State Employees’ Retirement System has also committed $50 million to Hahn’s Fund III and $25 million to Hahn’s Fund III-S LP, according to PEI data. Other investors in Fund III include New York State Teachers’ Retirement System with a $100 million commitment and New York State Common Retirement Fund with $25 million.

Hahn invests in both publicly listed and privately held companies and focuses on high-value-added manufacturing, considered Korea’s core competency, according to investment advisor Hamilton Lane’s note to PSERS.

Prior funds have had significant exposure to industrial businesses, such as auto parts and building materials companies. Portfolio companies include Ssangyong Cement, Korea’s largest cement maker; Hanon Systems, Korea’s largest independent manufacturer of auto parts; and SK Shipping, Korea’s largest wet bulk shipping company.

The firm declined to comment.

Since 2005, when regulatory changes permitted private equity funds to set up, South Korea has emerged as the third largest private equity market in Asia, according to a July McKinsey & Company report. Buyouts is the most favoured strategy and 75 percent of investments were in consumer, industrials, financial services and infrastructure for the 2005-2017 period. Private equity allocated almost $100 billion in capital during the same period.

South Korean private equity is made up of global and local players. Global managers including Carlyle Group, KKR and TPG have offices in the country. The two largest local private equity firms, Hahn and MBK Partners, took almost 60 percent of all private equity capital raised by South Korean funds in 2013 and 2016, McKinsey’s report noted.