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Private equity funds invest in Korean films, real estate

Feb. 21, 2012 - 18:40 By Korea Herald
Private equity funds have increased their holdings in real estate assets and projects related to the boom of the Korean Wave data showed Tuesday.

According to the Korea Financial Investment Association, the country’s entire fund market estimated at 311.1 trillion won ($276.9 billion), with the share of private equity funds rising fast.

As of Feb. 17, general funds available for retail investors are valued at 201.3 trillion won, down 75 trillion won from April 2009. Private equity funds were worth 109.8 trillion won, down just 7 trillion won during the same period, and its combined market share actually rose from 29.8 percent to 35.3 percent.

For retail investors in Korea, private equity funds are still a new instrument, mainly because they are not publicly traded on a stock exchange. These funds, which tend to pursue their own set of goals, are flexing their muscles on the local market as they diversify their investment portfolios into bond funds to bolster returns.

Private equity funds are particularly active in movies, musicals and other content-related investment projects that are deemed more risky than other options.

Local banks and other institutions once jumped into the film market, betting big on a host of promising movie projects, only to swallow hefty losses, not least because box-office performance was hard to predict.

But the trend is changing noticeably as private equity funds begin to notice the potential of popular Korean movies and TV drama series that are increasingly welcomed by audiences across the world.

“Investors of private equity funds are now interested in the Korean Wave boom, an internationally known trend that could bring new revenues with various projects,” said an official at a major fund management firm.

Although it is Korean pop music, or K-pop, that is at the forefront of the Korean Wave, private equity fund investors pin their hopes on a positive spillover effect from Korean pop culture.

The Korean stock market recently staged a rally on the strength of strong buying by foreign investors, brushing off earlier concerns that a slump would persist due to the eurozone debt woes.

Reflecting such concerns, private equity funds invested aggressively in real estate funds, a channel that produces steady returns.

In 2009, private equity funds set aside 7.3 trillion won for such real estate funds. The latest figure this month is set at 15.4 trillion won.

Meanwhile, real estate funds are being shunned by fund managers who control fund products available for retail investors.

Bond funds also appealed to private equity fund investors, with the value of holdings rising from 28.7 trillion won to 34.9 trillion won during the cited period.
By Yang Sung-jin (