A growing number of South Korea’s top investment bankers are leaving their companies to set up domestic buy-out funds designed to take on foreign rivals.
Jason Shin, head of Korea investment banking at Morgan Stanley, and Lee Jae-woo, managing director at Lehman Brothers, are stepping down to join the Bogo fund, which is hoping to raise $1bn of assets.
The fund – launched by Byeon Yang-ho, former finance ministry official – will also include Raymond So, who is stepping down as chairman of HCH Holdings.
The departures come a month after Michael Kim, former head of Carlyle Group’s Asian business, set up a local buy-out fund that hopes to raise $1.5bn.
South Korea is one of Asia’s most active merger and acquisition markets, with about $18.4bn worth of deals announced last year, according to Dealogic. Several big deals are expected this year, including the planned sale of state holdings in the Daewoo group.
The government has tried to help create big local buy-out funds to challenge foreign investors, which have bought big South Korean assets almost unhindered since the 1997-1998 financial crisis.
But only five domestic private equity funds have been set up since December, when new rules on local buy-out funds came into effect. Many Korean financial institutions are finding it difficult to raise funds because of their lack of experience. The five new funds are still relatively small, which has limited their ability to take on foreign rivals.
Mr Byeon said his fund would benefit from the financial expertise of its new team members. He is hopinghopes to raise
70 per cent of the capital domestically over the next two months, raising the remainder from overseas markets. “We are superior in terms of deal sourcing, because we have a strong local network,” Mr Shin said.
The Bogo fund is planning to invest in undervalued small-to mid-sized companies worth more than $100m, which are in need of capital and better management. “Although the number of big deals has fallen there are still many targets that foreign funds do not have access to,” Mr Shin said.
Analysts believe domestic private equity funds have a better chance of acquiring remaining Korean assets such as Woori Bank and LG Card amid growing unease over the profits foreign private equity investors have been making in Asia’s third-largest economy.