Hong Kong's Zento Partners Announces Redemption Notice for 1.3 Trillion KRW Fund

Seems to Have Notified Redemption Deferral Due to Early Repayment Clause

[Asia Economy Reporter Minji Lee] A fund worth 1.3 trillion KRW sold by the Hong Kong-based private equity firm Gentu Partners is facing a redemption suspension crisis.

According to the financial investment industry on the 4th, Gentu Partners notified domestic fund distributors on the same day that it would postpone redemptions for the entire 'KS Asia Absolute Return Fund' and 'KS Korea Credit Fund.'

Last week, Gentu Partners informed one of the distributors, Kiwoom Securities, about the postponement of redemption on the maturity date, and subsequently notified other distributors whose maturity dates had not yet arrived about the redemption delay.

It is known that Shinhan Financial Investment sold 400 billion KRW, Samsung Securities sold 140 billion KRW, and Kiwoom Securities sold 260 billion KRW of Gentu funds. Woori Bank, Hana Bank, and Korea Investment & Securities also sold the funds, bringing the total scale to 1.3 trillion KRW.

Gentu Partners has been managing the 'KS Asia Absolute Return Fund' and 'KS Korea Credit Fund,' investing in high-quality bonds. However, the leveraged structure of the 'KS Asia Absolute Return Fund' has suffered a decline in asset value due to the impact of the novel coronavirus disease (COVID-19), causing difficulties in redemption.

Industry insiders believe that Gentu postponed redemptions due to an asset under management (AUM) trigger clause related to early repayment of borrowed funds. This clause allows the lending financial institution to recall loans if the asset manager's holdings fall below a certain threshold.

If redemptions are executed from the 'KS Korea Credit Fund,' Gentu's holdings could fall below a certain level, triggering loan recalls, which may be why redemptions were postponed.

Distributors are reportedly preparing to take active measures, including filing complaints with Hong Kong financial authorities to recover funds.