Why Korea is fertile ground for those seeking new LPs

Ardian has become the latest private markets firm to open an office in a country whose institutional investors are hungry for private markets.

Ardian has become the latest private markets firm to tap limited partner appetite in South Korea with a dedicated office.

The Paris-headquartered investment firm has opened a Seoul office, led by director Won Ha, according to a statement. Ha, who joined Ardian in 2011, was previously involved in the firm’s funds of funds and investor relations businesses based in Singapore.

The opening comes amid increasing interest in private markets strategies from Korea LPs. At sister publication Private Debt Investor‘s inaugural Seoul Forum last week, LPs expressed interest in the asset class because it seems tailor-made for their needs: a consistent stream of distributions (unlike buyout funds), allowing investors to meet their obligations.

At sister publication PERE’s Seoul conference, LPs explicitly told GPs to establish an outpost in the South Korean capital and hire local investment professionals.

The learning curve may be steeper for Korean LPs than in other parts of the globe. One of the key things Lotte Non-Life Insurance’s Janghwan Lee, the insurer’s head of alternative investment management, said he looks for in an investor is a training programme and the ability to make connections.

A top-level source at an advisory firm noted that the goal of many Korean investors is to ultimately end up on a fund’s LP advisory committee.

One senior executive at a large pension plan noted that ownership of a firm by its employees is an important factor, along with willingness to make a substantial GP commitment to funds. Both these things, this source said, evidence alignment of interest between the credit manager and its investors.

The work can bear fruit, though, as multiple Korean LPs said the country’s investors value relationships, and one noted that they look favourably upon recommendations or introductions from people they know. That does not, however, mitigate the need to work with a local placement agent and other advisors.

The Korean pension plan executive, along with Lee, noted that now could be a time for them to start considering special situations or distressed debt strategies, potentially providing further openings for firms with those capabilities.

The advisory executive said Korean LPs often start out with three questions of GPs: what are your assets under management? What is your latest performance? And who else is investing with you?

Given the importance of relationships to Korean LPs, landing commitments from one or two respectable pension plans – not just from Korea but from around the world – may effectively provide “references” that will gain you clout with investors more widely.

In Ardian’s case, the firm has 12 Korean clients who account for more than $1.4 billion assets under management, according to Asia head Jan Philipp Schmitz. Its 750 Asian LPs include pension funds, insurance companies and family offices who invest across strategies including secondaries, buyout, infrastructure, and private debt.

One thing’s for sure: building an investor base in Korea will take more than lip service. It will require GPs to take concrete action and rack up frequent-flier miles, but the saying that “not all worthwhile endeavours come easy” certainly applies here.

Write to the author: andrew.h@peimedia.com