Private equity shifts from M&A to private credit lending

IMM Credit & Solutions CI

South Korea‘s private equity firms are increasingly turning to private credit as they dial back traditional buyout deals amid lingering public skepticism following high-profile cases such as the Homeplus situation.

Institutional investors including pension funds and mutual aid associations are also raising allocations to credit strategies, helping expand the market. According to investment banking sources on Thursday, three credit-focused subsidiaries of major Korean private equity firms have successfully closed blind funds this year.

IMM Credit & Solutions completed the closing of its first blind fund at 953 billion won ($657 million) at the end of June, attracting commitments from 31 institutional limited partners including the National Pension Service and Korea Post. STIC Credit closed a 430 billion won fund, while Glenwood Credit secured roughly 600 billion won.

New entrants are also emerging. Private equity Praxis Capital Partners established Praxis Credit & Solutions in July, while Affirma Capital set up Affirma Capital Credit Solutions Korea and recruited senior talent, including a former National Pension Service executive.

Limited partners are showing a more constructive stance toward private credit. The Korea Teachers Pension increased its allocation to the strategy to 40 percent this year from around 20 percent previously. The National Pension Service created a dedicated private credit investment team this year, and the Public Officials Benefit Association (POBA) plans to lift its allocation to 33.5 percent by 2029.