Investors Growing Anxious Over Delays in Confirming Lime Fund Loss Rates

Delay in Seller's Data Entry Procedures
Additional Evaluation Procedures Required for Some Sub-Funds

[Asia Economy Reporters Hyojin Kim and Jihwan Park] Investor anxiety is escalating as the confirmation of loss rates for some Lime Asset Management’s redemption suspension funds, which are expected to incur losses in the trillion-won range, is being delayed. Once the asset manager reflects the net asset value (NAV) adjustments for the redemption suspension funds, investors can directly check the current loss rates through the sales companies’ system input procedures, but this timing is being postponed.

According to the financial investment industry on the 24th, the NAV adjustment for Lime Asset Management’s funds and the related system input procedures by banks and securities firms, originally expected to be completed by the 21st, have been delayed until the 27th. Since the 14th, Lime Asset Management has adjusted the NAVs of the parent funds 'Pluto FI D-1' and 'Tethys 2' and completed the first round of NAV adjustments and system processing for the child funds overlapping assets with these two parent funds.

Accordingly, on the 17th, the sales companies reflected the adjusted NAVs of the child funds in customer accounts. Some of the child funds’ loss rates confirmed at that time were reported to be around 6-40%. However, the NAV adjustments for child funds related to Pluto TF (Trade Finance Fund) and Credit Insured (CI Fund), which began on the 18th, as well as the NAV adjustments for child funds overlapping assets with three other parent CI funds, have been delayed.

As scheduled, the additional system input procedures following the NAV adjustments were supposed to be completed by the 21st, allowing investors to check the NAV adjustment results of their subscribed child funds on the 22nd.

A financial investment industry official said, “Some child funds have assets they invested in themselves, so additional evaluations are necessary,” adding, “It seems these circumstances are causing the delay in the procedures.” The NAV adjustments reflect the evaluation results by Lime’s Collective Investment Asset Valuation Committee based on the fund audit by Samil Accounting Corporation.

The principal investment of Lime Asset Management’s private fund investors is currently short by more than 1.2 trillion won compared to asset value. According to the Financial Supervisory Service and the Korea Financial Investment Association, as of the 20th, the net assets of 262 private funds managed by Lime Asset Management totaled 2.8142 trillion won, falling short by 1.2203 trillion won compared to the subscription amount of 4.0345 trillion won.

The fact that net assets are less than the subscription amount means investors are incurring losses of that magnitude. The gap between net assets and subscription amount surged from about 280 billion won on the 12th to 900 billion won on the 14th, exceeded 1 trillion won on the 17th, and has since grown to over 1.2 trillion won.

The problem lies ahead. Lime Asset Management’s NAV adjustments for fund assets are ongoing, and especially when the audit results for the Trade Finance Fund, which is expected to incur total losses, are released, investor losses are expected to balloon like a snowball. The audit results by Samil Accounting Corporation for the Trade Finance Fund are expected by the end of next month.

Lime Asset Management anticipates that the NAV for the 240 billion won Trade Finance Fund will fall by about 50%, but the Financial Supervisory Service views it as a total loss.

Regarding this, Lime Asset Management stated, “The investment structure of the redemption suspension funds involves customers subscribing to child funds, which then invest directly or indirectly through total return swaps (TRS) in parent funds, and the total subscription amount and net assets of the company’s funds inevitably overlap significantly.”