South Korea’s Daou Kiwoom Group running from financial to information technology (IT) and contents services is ready to take on the private equity fund (PEF) market by creating a fund with initial capital of 50 billion won ($43.6 million) .

According to industry sources on Sunday, Daou Kiwoom Group will set up Kiwoom PE next month by raising funds from Kiwoom Securities and other key affiliates. Earlier this month, Kiwoom Securities said in a regulatory filing that it would burden 20 billion won for Kiwoom PE, while other affiliates would chip in the remaining amount. Kiwoom PE will be officially launched in the first half of this year and Yoon Seung-yong, executive managing director of Kiwoom Investment, was nominated as its first CEO.

The group is believed to have decided to set up Kiwoom PE in a move to speed up investments in alternative assets mainly carried out by the group’s existing investment arms, Kimwoon Asset Management and Kiwoon Investment. The latest decision of Daou Kiwoom Group that started as an IT company in 1986 also comes after it successfully acquired a savings bank and stakes in the country’s major commercial bank Woori Bank through Kiwoom Securities last year, further expanding its presence in the Korean financial industry.

Kiwoom PE already draws attention for its large equity capital. By comparison, MBK Partners, Korea’s leading PEF house, is capitalized at a mere 1.2 billion won. Other major PEFs are also incomparable with STIC Investments 36.5 billion won, Hahn & Company 19.8 billion won, IMM Private Equity 1.5 billion won and VIG Partners 800 million won. PEFs generally don’t need a lot of its own money for business as they usually raise funds from the outside, but the large equity capital underscores the group’s keen interest in PEF business.

Korea’s fast-growing PEF market is another factor behind the group’s bold decision, industry observers said. Korean PEFs reported 62.2 trillion won of dry powder for future investment last year, a breakneck growth from 26.6 trillion won in 2010, according to government data. In the same period, the number of domestic PEFs snowballed from 148 to 383, driven by a huge inflow of money from investors who look for better investment opportunities amid increased uncertainties over domestic and global economies.

Market watchers believe Kiwoom PE would be aggressive in the PEF market wielding its financial muscle. When raising a private equity fund, a PEF operator sets aside part of its leverage compulsorily and its ample liquidity will make its fledgling PEF attract investors a lot easier. In addition, its low exposure to closing risk which refers to a failure in fundraising will benefit the PEF in the operational side.

By Song Gwang-sup

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]