KDB Capital’s investment in project-specific funds has shrunk sharply as it strictly manages risky assets in its portfolio.
The credit finance firm has altered its investment portfolio in a move to better control its risk, according to sources on June 2. KDB Capital aims to keep its portion of investment assets classified as risky in its portfolio to below 25 percent of its total assets.
KDB Capital’s investment assets reportedly represent between 27 percent and 28 percent of the total assets, which has already exceeded the limit. In order to reduce the portion of investment assets, KDB Capital has been very selective in choosing where to invest, putting money only in acquisition financing deals or mezzanines that offer guaranteed returns.
“KDB Capital has rapidly reduced its investment as a limited partner since the second half of last year,” a private equity firm official said. “Market insiders widely think that it is difficult to receive funding [from KDB Capital] unless it is a structured deal that offers guaranteed returns.”
KDB Capital’s cautious approach is in stark contrast to other financial institutions which are showing signs of restarting investments that have been suspended due to the Covid-19 pandemic.
Major credit finance firms Shinhan Capital and IBK Capital are considering investments in various kinds of deals. Aju Capital, Acuon Capital and DGB Capital, which usually provide investment funds to small and medium-sized general partners (GPs), have also resumed their investments, while KDB Capital is making limited investments.
KDB Capital’s strategy has shifted to enhancing its GP organization in return for limiting its investment. The firm has established a team to actively act as a GP. It may also plan to secure funds by forming a blind-pool fund with a private equity firm so that it can continue to make investments without depending on internal funds. (Reporting by Se-hun Jo)