Signaling an era of increased competition in the South Korean private equity market, the country’s first two locally owned private equity funds have launched, according to the government’s Financial Supervisory Service.
The funds are affiliated with Mirae Asset Securities and Woori Financial Group, respectively, according to a report in the Yonhap English News.
The Mirae private equity fund, managed by Mirae Asset Partners and 54 percent owned by Mirae Asset Securities, has won 100 billion ($100 million) under management. The fund is backed by pension funds and “other financial investors”, according to the report.
Woori Private Equity Fund, fully owned by its parent company, manages a won 210 billion fund, backed by banks and other investors.
Until recently, the South Korean financial authorities effectively banned local private equity funds in an effort to attract foreign investment following the 1997 economic crisis. New rules have reversed this foreigners-only policy and have also given local funds an exemption from holding-company and fair-trade rules for 10 years.
Additional local vehicles are expected from the Korea Development Bank, which is seeking between won 300 billion and won 1 trillion, and Kookmin Bank, which has announced plans to launch a fund with a target of between won 300 billion and won 500 billion.
Already, the Woori private equity fund has announced a transaction – a won 42 billion investment in Woobang Company, a bankrupt construction company. The deal is considered a first by a locally owned private equity firm.
The Korean government has reason to want private equity in the country to have more local participants – just recently US firm Newbridge Capital agreed to sell its stake in Korea First Bank to HSBC for an estimated gain of $1 billion. HSBC has agreed to buy the bank for $3 billion (€2.2 billion). Newbridge, a joint venture between Texas Pacific Group and Blum Capital Partners. In 1999, Newbridge paid just $600 million for its 51 percent stake.