[2020 National Audit] Collapsed Private Equity Fund Market... Reduced by One Quarter

Assemblyman Yu Uidong "New Private Equity Funds Decreased from 18.5 Cases per Day Last Year to 4.1 Cases This Year"

[Asia Economy Reporter Park Sun-mi] After a series of private equity fund fraud cases such as Lime and Optimus, the entire private equity fund market has reportedly collapsed.

According to data on the "Status of Professional Investor-type Private Equity Funds in the Last 3 Years" submitted to Yoo Ui-dong, a member of the National Assembly's Political Affairs Committee from the People Power Party, by the Financial Supervisory Service on the 12th, the number of professional investor-type private equity funds registered with the Financial Supervisory Service averaged 17 cases per day in 2018 and 18.5 cases per day in 2019, but sharply dropped to an average of 4.1 cases per day this year. Comparing last year and this year, the number of newly established private equity funds has been cut to a quarter.

Looking at the monthly numbers, the number of newly established private equity funds was 417 in January 2018 and increased about twofold to 805 in April 2019. After that, suspicions about the mismanagement of Lime funds surfaced in the capital market, and from May to June of that year, when the Financial Supervisory Service detected abnormal signs, the number of new fund establishments began to steadily decrease. Eventually, in May this year, when the Financial Supervisory Service launched a full-scale inspection into the operation of the Optimus fraud fund, the scale of new private equity fund establishments plummeted to 54 cases per month.

The sharp decline in private equity fund establishments is analyzed to be due to a combination of factors, including distrust in the private equity fund market, reluctance of major distributors to sell, and the financial authorities' comprehensive investigation of private equity fund operators.

Assemblyman Yoo said, "In the capital market, where trust is key, large-scale fraud cases like Lime and Optimus have caused financial consumers to distrust private equity funds themselves," adding, "The role of private equity funds, which breathe vitality into the Korean economy, has been damaged by certain forces." He also added, "It is now time for the financial authorities to focus on reorganizing the system to restore trust in the capital market."

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