Private Equity Fund Full Inspection Underway... Eun Seong-su: "All 10,000+ Funds Need Checking Even If It Takes Time"

[Asia Economy Reporter Park Jihwan] Following last year's Lime Asset Management and the recent large-scale redemption suspension incident at Optimus Asset Management, the possibility of a full-scale investigation into the entire private equity fund market has been raised. Experts evaluate that it is a matter of time and cost, not something that is completely unfeasible.

According to financial authorities and the financial investment industry on the 24th, Eun Sung-soo, Chairman of the Financial Services Commission, mentioned the option of a full investigation of private equity funds in response to investor damages caused by the recent consecutive redemption suspension incidents in private equity funds.

Chairman Eun said, "In the case of Optimus Asset Management, the problem was that the promised documents and the actual assets were different," adding, "Even if it takes some time, I am considering inspecting all 10,000 private equity funds. We are discussing a plan to check all these aspects with the Financial Supervisory Service."

He emphasized, "The private equity market has always been a self-regulated area, but if order collapses, trust in the capital market declines," and added, "At the very least, it is necessary to conduct due diligence to confirm whether the funds are being managed as promised."

According to the Korea Financial Investment Association, as of the 19th, there are 10,282 private equity funds with net assets totaling 424 trillion won. About 230 specialized private equity management companies are expected to be subject to the full investigation. The Financial Supervisory Service investigated 1,786 private equity funds (worth 22.7 trillion won) managed by 52 specialized private equity management companies from November last year to January this year.

Chairman Eun said, "In past investigations by authorities, only the documents submitted by the management companies were used, but in cases like Optimus, it is necessary to compare with the actual assets," and added, "In the past, only 52 companies were investigated, but if possible, even if it takes 10 years, I hope all are investigated."

Experts commonly agree that a full investigation of private equity funds is a matter of cost and time, not an impossible task. However, there are concerns about practical constraints, such as the Financial Supervisory Service's Asset Management Inspection Division having only 32 personnel, indicating the need for some supplementary measures. Investigating even a single fund takes considerable time to understand the connections of investment assets.

A financial investment industry official said, "Currently, personnel specialized in financial sector investigations and inspections are limited to the Financial Supervisory Service," and pointed out, "In cases like Optimus, where management companies deliberately submit false information, it is quite difficult to detect, and it is also difficult for the current Financial Supervisory Service personnel to conduct on-site investigations for all management companies."

Since inspection and investigation matters are difficult to outsource due to security issues, there are voices suggesting that senior retired personnel within the Financial Supervisory Service could be assigned as specialized inspection personnel.

A financial authority official stated, "Whether through document investigations or on-site inspections, if a full investigation is decided, it is not something that cannot be done," but added, "However, the effectiveness relative to the time spent should be considered."

This content was produced with the assistance of AI translation services.