Korean institutional investors are known to like their external fund managers having a local presence—and they have a lot of pull given their size. Plus they are eager to allocate to private-markets overseas, particularly less mainstream credit assets.
Against this backdrop Adams Street Partners, a Chicago-based private markets investment firm with $31 billion under management, has set up an office in Seoul.
It will be hoping to capitalise on the high demand that fund executives see in Korea for illiquid alternatives. For instance, local insurance firms have been very active in allocating to niche fixed income such as private credit this year, institutional specialists told AsianInvestor.
One driver of this is the introduction of risk capital rules similar to Europe’s Solvency II, said one Singapore-based fund executive. As a result, it benefits insurers to hold assets that they do not have to mark-to-market, as these attract a lower risk charge.
US municipal bonds are one example, he added, and several firms made their first allocations into these assets this year. Sources familiar with the Korean market said they had seen muni bond mandates issued in the range of $100 million to $300 million.
Meanwhile, another senior fund executive said she had seen some very large private debt mandates awarded in Korea. Institutions here—and elsewhere in Asia—have been seeking out more esoteric areas of credit and are becoming more active and innovative in this area, she added.
Korea’s Public Officials Benefit Association is one example of this trend, issuing its first segregated mandates in private debt earlier this year, as reported.
Yet asset managers are also facing competition as the biggest players—such as Korea's National Pension Service—have expanded their private market investment teams overseas.
Seoul represents Adam Street's fourth office in the region, after Beijing, Singapore and Tokyo. The move comes after private markets giant Hamilton Lane set up a branch in Seoul in 2015.
Adams Street said in a statement that the new office would enable it to more effectively serve clients and access investment opportunities in the region. Chris Cho, who joins the firm as a principal, will lead the office and focus on the development of institutional client and consultant relationships.
Cho joins from Lazard Asset Management, where he was a vice president on the sales and marketing team in South Korea. Before joining Lazard he held positions at Shinhan BNP Paribas Asset Management and Mirae Asset Global Investments.
Adams Street runs investments across five strategies: primary and secondary private equity fund investments, co-investments, private credit and direct venture/growth.
An Adams Street spokeswoman did not respond to requests for comment by press time.