Financial Supervisory Service Announces 2023 Trends and Implications of Institution-Exclusive Private Equity Funds
Last year, the domestic institutional private equity fund market recorded the highest number of funds and committed amounts ever, but investment execution decreased by 11.9%. The overall investment execution scale fell short of previous years due to a significant reduction in overseas investment execution.
According to the 2023 Institutional Private Equity Fund Trends and Implications report released by the Financial Supervisory Service on the 25th, the number of domestic institutional private equity funds stood at 1,126 as of the end of last year, an increase of 28 funds (2.6%) compared to the end of the previous year (1,098 funds).
The committed amount also rose by KRW 11.1 trillion (8.9%) to KRW 136.4 trillion. The executed amount was recorded at KRW 98.9 trillion, an increase of KRW 1.8 trillion (1.8%).
The number of General Partners (GPs) managing these funds was 422 companies, up by 7 companies (1.7%) from the previous year (415 companies). Dedicated GPs increased to 316 companies (74.8% of the total), showing an upward trend. This contrasts with financial companies (52 companies) and venture capital firms (54 companies).
By scale, there are 37 large GPs (with committed amounts of KRW 1 trillion or more), 157 medium-sized GPs (KRW 100 billion to KRW 1 trillion), and 228 small GPs (less than KRW 100 billion). Although large GPs account for only 8.8% of the total, the funds they manage make up 64.6% of the total amount. The proportion of small and medium-sized GPs is declining.
In 2023, 147 new funds were established, raising KRW 18.7 trillion. However, the number of new funds decreased by 28 (16.0%) compared to last year (175 funds). Instead, the amount raised increased by KRW 2.4 trillion to KRW 18.7 trillion, influenced by the larger size of new funds compared to last year (KRW 16.3 trillion).
By fund type, project funds accounted for 95 (64.6%), and blind funds for 52 (35.4%), with the proportion of blind funds increasing.
These funds executed investments worth KRW 32.5 trillion across 443 domestic and overseas companies last year. This represents an 11.9% (KRW 4.4 trillion) decrease compared to the previous year (KRW 36.9 trillion). This contrasts with the increase in investment execution scale in 2022 compared to the previous year. Domestic investment amounted to KRW 28.5 trillion, up 11.8% (KRW 3 trillion), but overseas investment dropped by 64.9% (KRW 7.4 trillion) to KRW 4 trillion.
The unexecuted committed amount (dry powder), indicating additional investment capacity, was KRW 37.5 trillion as of the end of last year, up 33.0% (KRW 9.3 trillion) from the same period the previous year. This is due to the committed amount increasing more than the executed amount.
Investment recovery amounted to KRW 18.8 trillion, slightly exceeding the previous year (KRW 18.1 trillion). This is the highest level since the introduction of the institutional private equity fund system. Although final recoveries through M&A decreased due to a contraction in the domestic and overseas M&A markets, total investment recovery increased due to a rise in intermediate recoveries such as partial sales to third parties.
Last year, a total of 119 funds were liquidated, which is 8 fewer than in 2022. The average fund duration was 4.8 years, longer than the previous year's 3.9 years.
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