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Local investors warm up to private equity funds

Dec 26,2007
Private equity funds, still considered risky and overregulated by some, are slowly gaining ground in Korea, according to the Financial Supervisory Service yesterday.
The watchdog said in a press release that the number of PEFs registered with the FSS as of October was 41, a 64 percent increase from 25 at the end of last year. A total of 8.3 trillion won ($8.8 billion) was invested in local PEFs this year, as opposed to 5.9 trillion won last year, the watchdog said.
Sixteen PEFs were newly registered this year compared to 12 in 2006.
The investment destination for the funds also become more varied: the funds were invested in 21 companies, mostly in the financial and manufacturing sectors, last year.
But this year, they were in 77 companies ranging from fast food restaurants and golf courses to home shopping companies, the watchdog said.
Private equity funds invest in companies with the intention of buying a controlling stake, restructuring the companies’ management and then reselling for a profit.
PEFs were introduced in Korea in 2004 after foreign PEFs, including U.S.-based Lone Star Fund, took over local companies at cheap prices.
Because the regulation has been criticized for limiting private equity funds more than necessary, the watchdog plans to ease it beginning next month.
“As shown in the number of PEFs and their strong performances, the local PEF market is gradually maturing,” said an official at the FSS, asking to remain unnamed.
However, analysts say that Korean PEFs are still small, compared to global PEFs.
According to the Korea Exchange, the local bourse operator, global mergers and acquisitions, totaling $3.7 trillion as of October, are led by PEFs that control between 10 trillion and 20 trillion won.
Among Korean PEFs, on the other hand, only four have more than 500 billion won in their control.


By Moon Gwang-lip Staff Reporter [joe@joongang.co.kr]


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