Korea Asset Management Corporation (KAMCO) will create a 400 billion won fund to support small and midsize domestic auto parts companies. The agency judged that preemptive support is needed because this sector is expected to take the hardest hit from the U.S. tariff shock.
According to the investment banking (IB) industry on the 19th, KAMCO is selecting a general partner (GP) for the "2025 PDF No. 6 Fund." KAMCO will finish selecting the manager in November and begin raising the fund. KAMCO decided to commit 100 billion won to one manager to create a 400 billion won fund.
The fund targets small and midsize companies that supply auto parts to domestic automakers and their partners. It will invest in asset-backed trust loans based on these companies' accounts receivable and other collateral. In an asset-backed trust loan, a company transfers asset ownership to a trust company and borrows money from a financial institution.
Specifically, it will invest in corporations pursuing mergers and acquisitions (M&A) or business line shifts, or carrying out financial improvements such as reducing liabilities and raising capital. Explaining the purpose of the fund, KAMCO said, "It is to support operating funds and facility investment funds, in the form of loans, for small and midsize companies in the auto industry that are pushing business and financial restructurings due to the worsening external management environment and paradigm shifts in the industry."
KAMCO will contribute up to 25% of the total fund commitment as junior capital, with the remainder as senior. The manager must make a mandatory junior investment of at least 0.5% of the total commitment. The fund's investment period is two years. Once the manager selection is completed, full-scale investments are expected to proceed in the first half of next year.
The government reached a trade deal with the United States in Jul. to lower auto tariffs to 15% from the existing 25%. However, with disagreements over specific implementation measures such as revenue sharing, the auto industry is still paying the 25% tariff.
KAMCO is also creating the Corporate Structure Innovation Fund No. 6 to support key industries worried about U.S. tariff damage and corporations undergoing restructuring. The fund will invest in six sectors: petrochemicals, semiconductors, automobiles, displays, steel, and secondary batteries. The fund will be created at up to 1 trillion won.