[2020 National Audit] Rep. Lee Young: "Differences in Redemption Terms of Private Equity Funds by Investor Cause Individual Losses"

[Image source=Yonhap News]

[Asia Economy Reporter Koo Eun-mo] At the National Assembly’s audit session on the Financial Supervisory Service (FSS), concerns were raised that differences in redemption conditions of private equity funds by investor type are leading to losses for individual investors who have less access to information.

On the 13th, Lee Young, a member of the People Power Party, pointed out during the National Assembly’s Political Affairs Committee audit of the FSS that individual investors face lower priority and longer procedures when redeeming private equity funds compared to institutional investors.

Lee noted that large-scale redemptions by institutions began as early as August last year, before the Lime Asset Management scandal fully erupted, indicating that institutions with better access to information used it to avoid losses.

He criticized, “Individuals can redeem only once a month and receive their money 25 days after applying for redemption, whereas institutions can redeem about once a week and receive payment within a few days. Ultimately, only ordinary citizens, who are vulnerable to information asymmetry, suffer losses and have their money tied up.”

In particular, Lee asked Yoon Seok-heon, Governor of the FSS, “Lee Jong-pil, former Vice President of Lime, used insider information to create the employee fund Tatis 11-ho, which has no sales or redemption fees and allows daily redemptions. Given that the fund planners are creating redemption conditions favorable to themselves, will you continue to maintain this dual redemption system?”

In response, Governor Yoon said, “Individual investors are at a disadvantage due to information asymmetry. Since this is a situation that even supervisory bodies find difficult to address, we will consult with the Financial Services Commission to discuss institutional improvements.”

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