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South Korea-Based LPs Investing in Private Equity Funds - March 2013

by Yong Xiang Pua

  • 08 Mar 2013
  • PE

There are 68 South Korea-based institutional investors that have existing commitments to private equity funds. Sixty private equity investors in South Korea are currently looking to invest in new private equity funds while the remaining eight investors will seek additional private equity exposure via fund commitments in the longer term. The most numerous investor types are insurance companies (14), banks (11), government agencies (10), and public pension funds (9).

The South Korean private equity community represents $2.6tn in terms of assets under management and $21.8bn in terms of existing allocation to private equity. Korea Investment Corporation is the largest investor in South Korea; the country’s only sovereign wealth fund accounts for 25% of the capital allocated to private equity by all South Korea-based LPs. Public pension funds form the largest investor type in terms of private equity allocation, making up 43% of the capital allocated to the asset class by domestic investors. Other significant investor types in South Korea include government agencies, insurance companies, and banks.

Buyout is the most favoured fund type amongst South Korea-based investors looking to invest in private equity funds; 35% of domestic institutional firms will consider buyout funds when seeking additional exposure to the asset class. Venture capital funds, including both stage-specific and general funds, and growth funds are favoured by 24% and 22% of South Korea-based investors respectively. A minority of the South Korea LP community pool is willing to consider mezzanine funds (7%) and secondaries funds (10%).

Thirty percent of South Korea-based investors have invested with first-time fund managers and remain willing to commit to first-time funds going forward. While 18% of these investors have yet to commit to a first-time fund, they will consider making their first commitment to first-time funds on a case-by-case basis. Only 3% of South Korea-based investors will invest in first-time funds managed by spin-off teams. The remaining 48% of South Korea-based investors will not invest in first-time funds.

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