As of the end of last year, the execution scale of institutional-only private equity funds was 24.1 trillion won, a decrease of 25.8% compared to the previous year. This reflects the influence of a global economic slowdown and a downturn in the mergers and acquisitions (M&A) market. While the number and committed amount of private equity funds are showing an increase, particularly among small and medium-sized funds, a growing preference for larger management companies is causing polarization in the industry.
The Financial Supervisory Service reported on the 30th that the number of institutional-only private equity funds increased by 11 to 1,137 compared to the previous year. The committed amount was 153.6 trillion won, and the execution amount was 117.5 trillion won, representing increases of 12.6% and 18.8%, respectively.
The FSS noted, "The institutional-only private equity fund market continues to experience external growth alongside increases in the number of funds, committed amounts, and execution amounts," adding, "However, due to the global economic slowdown and market stagnation, there is a tendency for the growth rate to slow down, including a decrease in new investment execution."
The number of operators (GP) for institutional-only private equity funds was 437, an increase of 15 from the previous year. By size, there were 40 large GPs, 155 medium-sized GPs, and 242 small GPs.
The number of newly established funds was 173, a 17.7% increase compared to 147 the previous year. Accordingly, the amount of new commitments also increased by 2.7%, from 18.7 trillion won to 19.2 trillion won. However, the number of new large funds and their investment scale have decreased due to a reduction in large investments resulting from the economic downturn, while small and medium-sized funds showed an upward trend.
However, the scale of investment execution actually decreased. Last year, 24.1 trillion won was invested, a 25.8% decrease compared to the previous year's 32.5 trillion won. By sector, a total of 90.2% of the total executed amount was concentrated in five industries, including manufacturing. Notably, investments in sewage, waste treatment, and recycling surged from 600 billion won to 3.3 trillion won, a 450% increase.
The FSS stated, "As the economic recession persists and uncertainty increases, institutional investors continue to adopt a conservative investment stance," and added, "The trend of preferring large GPs and the continuous market entry of new GPs are likely to lead to intensified competition among small and medium-sized GPs that lack experience."