Korea's leading institutional investors to invest $500 mn in European debt fund

South Korea’s major institutional investors including Samsung Life and Kyobo Life will invest $500 million together in a private credit fund managed by CVC Capital Partners Investment Management, with an expected return rate of about 7 to 8 percent that could rise further in a high interest rate environment.

According to the investment banking industry on Thursday, major Korean institutional investors will invest total $500 million in CVC’s European Direct Lending Fund III (EUDL III) with a total fund size of $3 billion.

Samsung Life will make the largest contribution of 150 billion won ($118.98 million) through direct investment, while others such as Kyobo Life, Dongyang Life, Shinhan Life, Mirae Asset Life, and DB Insurance, will jointly chip in through Shinhan Asset Management’s fund. Kyobo is said to invest about 10 billion won, the second-largest after Samsung.

CVC’s EUDL III will invest in loans extended for M&As and major firms in Europe, with a target yield of 7-8 percent in internal rate of return (IRR), a metric to estimate the profitability of potential investments, according to sources. Given that it is a floating rate fund, Korean institutional investors could expect higher returns than its target yield in the current high interest rate environment.

CVC’s previous EDUL series have been successful in returning higher yields to their investors. CVC’s EDUL II under the same management strategy achieved a yield of 9 percent, above its target of 7 percent, raising expectation for EDUL III, according to IB sources.

Reflecting high expectation, EDUL III attracted a total of $800 million, more than the initial fund size of $500 million. Due to fierce competition, Korean investors had to reduce their investment or missed opportunities to join. Domestic investors invested $45 million and $320 million in EDUL I and II, respectively.

CVC is a Luxembourg-based private equity and investment firm with $122 billion of assets under management.

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