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EMP Belstar

Korean investors quickest to jump into new TALF fund: EMP Belstar

By Jul 07, 2020 (Gmt+09:00)

South Korean institutional investors have become the world's first group of investors in a fund related to the Federal Reserve's new Term Asset-Backed Securities Loan Facility (TALF) program, committing $580 million to a TALF fund in late May.

New York-based EMP Belstar, of which about half of top managers are of Korean origin, raised the money just two months after US President Donald Trump announced the revival of the TALF, the speediest process compared with larger global investment firms such as BlackRock and PIMCO.

"It took us six months to raise $300 million 10 years ago, but this time we raised $580 million in just two months,” said Joonho Lee, head of EMP Belstar's South Korean operations.

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Joonho Lee, head of EMP Belstar Korea                             


“The 2009 TALF fund was the first offshore to be registered under the Financial Supervisory Service. It was hard to convince them because it was right after the financial crisis and there were concerns about structured financial products like ABS,” he added.

But things have changed over time, according to Lee.

"This time around, Korean investors used their global network, which they didn't have in the past, to get hands on extensive information. 10 years of accumulated experiences made their decision making process quick and efficient," Lee explained.

Familiarity with the fund manager and the hefty return from the prior TALF fund helped draw the bigger amount in a shorter period of time.

The average return for EMP Besltar 2009 TALF fund was 20% annually.

The TALF program was designed by the US Federal Reserve during the 2008 global financial crisis to encourage investors to purchase AAA-rated asset-backed securities (ABS) by offering favorable terms as a way to facilitate the loan market. At the time, Korean institutions invested in TALF through a fund established and managed by EMP Belstar.

EMP was one of the top 10 TALF borrowers during the 2008-09 financial crisis, representing 4% of the entire $77 billion TALF program.

“TALF program ends when ABS interest rate returns to normal as a result of sufficient liquidity injected into the market,” Lee explained. “This means that a delayed decision could result in loss of an investment opportunity,” he said adding, “Korean institutional investors joined the race early on, unlike the past.”


TALF funds invest only into AAA-rated ABS issued in the US, which is higher than the country’s AA+ credit rating, yet its low risk is not an indicator of low returns thanks to its leverage effect.

The Feds offer loans that are five to twenty-fold (on average tenfold) of the investments at a low annual interest of around 1% to incentivize private capital investment. Investors can make about 10% interest gains utilizing the interest rate spread between the 2% interest from AAA bonds and 1% interest from Fed loans.

“There will be additional capital gains when the market stabilizes and the price of the bond increases, moving inversely to interest rate,” said Lee.

It also eliminates risks that may stem from excessive leverage by offering a non mark-to-market loan to prevent risks of margin call triggered by a price fall, loan on a non-recourse basis, as well as pre-payable loan.

“We heard about the TALF program while discussing potential investment targets amid coronavirus,” said Janghwan Lee, the Head of Financial Investment at Lotte Insurance. “It was a quick decision because we were confident that this opportunity would be a strong investment with a high risk-adjust returns.”


EMP Besltar is a combined entity of EMP Infra and Belstar Group. EMP Infra was established by ex-World Bank Vice President Donald Roth, while Belstar was founded by Korean-American Chairman Daniel Yun and Joonho Lee who is the head of Korea operations.

After launching the TALF fund in 2009, the firm has raised funds over 1 trillion won ($836 million) with Korean institutions to invest in the US credit market, such as investments in General Electric’s receivables, collateralized loan obligations, and Small Business Investment Company (SBIC). Recently, the firm has beefed up investments into Korea including joint investments with Goldman Sachs and SK Group for a cold chain logistics center using refrigerant from LNG.

Write to Hyun-il Lee at

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