[Exclusive] Hahn & Company, the No. 2 player in the industry, to pull out of PEF Managers Association participation [fn Market Watch]

\r\n
\r\n[The Financial News] As the establishment of associations for domestic private equity funds (PEFs) gathers pace, Hahn & Company, one of the country’s largest PEs, has abruptly withdrawn from the PEF Managers Association, drawing attention to the reason behind the move.
According to the investment banking industry on the 20th, Hahn & Company recently formally notified the PEF Managers Association of its withdrawal from membership.
Hahn & Co. is a leading domestic PEF manager founded in 2010 by CEO Scott Hahn, who previously headed Morgan Stanley Private Equity Korea. The combined value of the portfolio companies it holds reaches 42 trillion won, and it has established itself as one of the country’s leading private equity firms after MBK Partners.
It is currently the No. 2 player in the industry, following MBK Partners, which ranks first in committed capital among domestic PEF managers (GPs).
Inside the investment banking industry, the reaction appears to be one of clear surprise.
One private equity executive said, "At a time when the establishment of the PEF association is moving into full swing, the withdrawal of the No. 2 player inevitably creates internal unease."
Some observers, however, pointed to the fact that Hahn & Company established a separate asset management unit, HC Asset Management (HCAM), earlier this year, signaling an expansion beyond its core private equity business into asset management. Rather than limiting itself to the PEF Managers Association, the firm is moving into a broader range of capital market businesses, so some say its association membership could become a burden for its business direction.
Earlier, the PEF Managers Association informed its member firms in early last month that annual fees would be charged on a tiered basis this year, depending on assets under management (AUM).
For example, large PEFs with AUM exceeding 3 trillion won would pay 50 million won a year. PEFs with AUM of 2 trillion won to less than 3 trillion won would pay 35 million won, those with 1 trillion won to less than 2 trillion won would pay 25 million won, those with 500 billion won to less than 1 trillion won would pay 10 million won, those with more than 100 billion won to 500 billion won would pay 5 million won, and those with 100 billion won or less would pay 1 million won. Previously, the only standard was that mid- to large-sized PEFs with AUM of at least 1 trillion won paid an annual fee of 10 million won.
In that sense, this is effectively the first detailed guidance on differentiated annual fees by AUM size.
The reason the PEF Managers Association is collecting annual fees by AUM size is that its limited budget has made it difficult to carry out various activities.
Another private equity industry executive said, "Since last year, with issues such as Homeplus and others, calls for tighter regulation of private equity have grown louder in the National Assembly of the Republic of Korea. Given the changing environment and the expanding role of the industry, active cooperation from large PEs is more important than ever." He added, "Fortunately, cooperation from other mid- to large-sized private equity firms, aside from Hahn & Company, has been very active, so the establishment of the association is expected to proceed smoothly."
Meanwhile, the Korea Private Equity Fund Council has been discussing a transition to establishing a PEF association since earlier this year, taking into account changes in the industry environment and the need to expand its role. In the investment banking industry, calls for a formal association have grown as the need for a systematic consultative body representing the PEF sector has been repeatedly raised. The council, which began operating in 2013 as an unincorporated association, is currently chaired by Park Byung-keun, CEO of Daishin PE.
\r\n
\r\n
kakim@fnnews.com Kim Kyung-a Reporter