Blackstone to open Seoul office for improved communication

The Blackstone Group is working to set up a Seoul office, seven years after the US investment firm closed it down, in response to growing calls from South Korean pension funds to improve the channels of communication.

Blackstone has hired a law firm to establish its South Korean office in the second half of this year, while Bain Capital, another US private equity firm, is set to launch its official Seoul office in the coming months, according to investment banking sources on Feb. 25.

Blackstone's move to open a Seoul office again reflects the growing influence of South Korean pension funds, taking a bigger and bigger share of global asset managers’ fundraising. In return, Korean limited partners (LPs), including the National Pension Service and the Korea Investment Corporation (KIC), are pushing global general partners (GPs) for a local presence to keep them updated on investments made via the GPs on a frequent basis.

“Blackstone informed us of opening a Seoul office again to strengthen its investment activities in South Korea,” a Korean pension fund source told Market Insight, the capital market news outlet of The Korea Economic Daily. Details about its new office, including the size of its workforce, have yet to be determined, he added.

Company name	Fundraising in Korea over past 5 years	Whether to have Korean office
Blackstone	$95.9 billion	Scheduled to open in H2 2021
Carlyle	$61.7 billion	Yes
KKR	$54.8 billion	Yes
TPG	$38.7 billion	Yes
Warburg Pincus	$37.6 billion	No
CVC Capital	$35.9 billion	Yes
Bain Capital	$25.7 billion	Yes
Apollo Investment	$25.7 billion	No
Source: Visual Capitalist, Private Equity International, Market Insight

Adding pressure on GPs to have a Korean office, the Public Officials Benefit Association, a $12 billion pension fund for provincial government employees, added a condition for its $100 million global REIT mandate last December: Qualified candidates must have a Korean office for regular monitoring and communication.

Last October, Korea Post said it would receive proposals for its 100 billion won investment in US fixed income only in Korean.

“Not a few global PEFs receive our investment money but have no presence in our country,” said a Korean retirement fund official. “Because of the language barrier and the time difference, sometimes we have a problem communicating with them.”  

For KIC, running a Korean office is an evaluation factor for the sovereign wealth fund to select a GP. In a recent telephone conversation with a senior Blackstone executive, KIC’s Chief Executive Choi Heenam asked whether the US firm had a plan to open a Seoul office. As the country’s financial cooperation ambassador, Choi is encouraging foreign GPs to set up operations in Korea.

BAIN CAPITAL TO BOOST STAFF NO.

Bain Capital is launching its official Seoul office to boost investments in the country. Until now, it has been running a temporary office in the country for the past one and a half years.

“About a year ago, we had fewer than five investment staff. Around year-end, we will double the number to ten,” a Bain Capital official told Market Insight.

After opening a Seoul office, Blackstone will step up investments in Korean companies and real estate, according to sources briefed on the matter. Its recent South Korean investments, managed by its Hong Kong office, include a 1.1 trillion won ($1 billion) buyout of Geo-Young Corp., a medical goods wholesaler, and a stake purchase in Starfield Hanam, South Korea's largest shopping mall, for an unspecified amount. Both investments were made in 2019. The firm was hardly visible in South Korea's M&A market last year.

In comparison, TPG and the Carlyle Group have been stepping up Korean investments. Last year, TPG acquired a stake in the mobile banking app Kakao Bank for 250 billion won, after investing 500 billion won in Kakao Mobility Corp., a taxi-hailing app, in 2017. Carlyle recently sealed a $200 million investment in Kakao Mobility.

Their Korean offices, however, may take charge of operations and communication with Korean LPs, rather than having the final say.

“A number of PEFs running an office here chose to give final decision-making authority either to their Hong Kong office, or to a tax haven office because of tax issues,” said a law firm official.

Meanwhile, Blackstone is expected to earn billions of dollars from its $300 million investment in South Korean handbag maker Simone Acc. Collection, which is planning to go public this year.

Write to Sang-eun Lucia Lee and Jun-ho Cha at selee@hankyung.com
Yeonhee Kim edited this article.