Carlyle’s new credit fund draws $200 mn from Korea

Ten South Korean institutional investors have committed about $200 million to the Carlyle Group’s first credit opportunities fund which recently raised $2.4 billion at its final close.

The fundraising amount in South Korea was the largest for an inaugural fund and nearly four times more than the $51 million that the Carlyle Global Infrastructure Opportunity Fund has raised simultaneously from Korea, according to investment banking sources on July 19.

The infrastructure fund, launched to invest in OECD countries, recently closed on $2.2 billion.

It was rare for a maiden fund to collect as much as $200 million from South Korean institutional investors because the lack of track records made it difficult for a new fund to win approval from their investment committees, the sources said.

Carlyle puts the expansion of credit business as a top priority as the private debt market is expected to grow at a faster pace than private equity, its co-chief executive officer Kewsong Lee said in an interview with the Korean Investors last September.

The South Korean limited partners for the Carlyle Credit Opportunities Fund include pension funds, retirement savings funds, banks and insurance companies but have not been identified.

They committed to the fund via a domestic vehicle run by Hyundai Investments Co. Ltd. IBK Investment & Securities Co. Ltd. marketed the fund.

For the $2.4 billion credit fund, Carlyle will be able to invest about $3.1 billion in opportunistic credit strategies, using leverage. It will lend primarily to upper middle market borrowers.

The fund has already committed approximately $850 million to 10 businesses in North America and Europe which include a privately-owned homebuilder and a listed media company, according to Carlyle’s announcement on July 11.

Opportunistic credit, with an estimated market size of $1 trillion, is expected to offer steady mid-teen returns with a low principal loss risk, Mark Jenkins, Carlyle’s global credit head, told the Korean Investors in February.

Separately, in the Carlyle Global Infrastructure Opportunity Fund, NH Investment & Securities Co. Ltd., Kyowon Invest Co. Ltd. and Yesco Co. Ltd., a holding company of the LS Group, have participated as limited partners.

They committed through STIC Alternative, a unit of a South Korean private equity firm.

Shinhan Investment Corp. will underwrite part of the South Korean commitments for resale to other institutional investors.

By Hyun-il Lee

hiuneal@hankyung.com