Korean Private Equity Firms Turn to Overseas Direct Investment Amid Mounting Global Barriers

CPPIB Scales Back Korean Exposure Since Last Year
Reduced Appeal in Fund Stability and Governance
LPs Shift Toward Long-Term Stability Over High Returns

A growing number of Korean private equity (PE) firms are making inroads into securing foreign limited partners (LPs), a domain long dominated by mega funds such as MBK Partners, Hahn & Company, and IMM Private Equity. However, as access to overseas capital becomes increasingly constrained, several managers are exploring direct overseas investment as an alternative strategy. The Korea Investment Corporation (KIC), which had previously worked only with foreign external managers, reportedly began recruiting local asset managers last month to expand its direct overseas investment portfolio.

Glenwood PE Secures $100 Million from CPPIB

According to the investment banking industry on the 16th, Glenwood Private Equity recently secured major foreign investors, including the Canada Pension Plan Investment Board (CPPIB) and Pavilion Capital, a subsidiary of Singapore’s Temasek Holdings. The fund, launched earlier this year, was fully subscribed within six months. CPPIB committed $100 million, while Pavilion Capital contributed several hundred million dollars. These investors are known for reinvesting in follow-on funds, positioning Glenwood PE as a potential successor to MBK, Hahn & Company, and IMM among Korea’s next-generation mega funds.

Premier Partners is also striving to attract foreign capital as it raises its sixth blind fund, targeting around $700 million. The firm is expanding its global network through placement agents while exploring a reinvestment commitment from its existing investor, the European asset manager Ardian. Meanwhile, UCK Partners completed a $770 million fundraising round after successfully attracting about $140 million from Asian sovereign wealth funds and global institutions. Market observers attribute UCK’s success to its proven track record—such as the profitable exit from Gong Cha—and the decade-long relationships it has cultivated with investors.

Diminished Attractiveness of Korean PE Amid Regulation and Political Risk

Despite a handful of successful fundraising cases, securing foreign LPs has become increasingly challenging for Korean PE firms overall. Expectations that capital diverted from China amid U.S.–China tensions would flow into Korea have faded, with Japan and Australia now emerging as more favored destinations. Japanese funds have drawn attention through high-multiple returns, while Australia’s political and regulatory stability has attracted significant inflows. In contrast, tightening domestic regulation and rising political uncertainty have eroded Korea’s investment appeal.

Many overseas LPs who previously committed to Korean funds are now reluctant to reinvest, citing disappointing returns. CPPIB, once considered a key backer of MBK Partners, began reducing its allocations to MBK and other Korean PEs last year. Meanwhile, major firms such as Affinity Equity Partners and Anchor Equity Partners have seen fewer large-scale exits and key executive departures, leading to concerns among LPs about fund stability and strategic continuity.

The shifting investment preferences of global LPs have further compounded the challenge. While Korean PEs previously delivered strong buyout-driven internal rates of return, investor capital is now increasingly directed toward infrastructure funds emphasizing long-term stability, credit funds pursuing moderate risk-adjusted returns, and special situation funds designed to weather market volatility. Heightened scrutiny of fund managers’ capabilities has also led LPs to adopt far more stringent due diligence standards.

KIC Launches Manager Selection for Overseas Direct Investment

Amid this changing landscape, some Korean PEs are venturing into direct overseas investment. According to industry sources, KIC began selecting domestic PEs last month to manage its overseas investment mandates. Several firms have been shortlisted, and final selections—two to three firms—are expected to be announced around November. Although the exact commitment size has not been disclosed, industry estimates put it at up to $200 million. The capital will primarily be allocated to funds supporting Korean companies in overseas mergers and acquisitions.

KIC had previously received $5 billion in government funding in 2015 to invest in foreign corporate M&A but recorded no major transactions. However, under CEO Park Il-young, who took office last September, KIC has been pushing to bring in Korean strategic investors (SIs) to accelerate its overseas investment initiatives. Market observers interpret the current PE selection process as part of this broader strategy to combine domestic strategic capital with global investment execution. One industry insider noted, “KIC is seeking to enhance execution capability through collaboration with local managers, given the difficulties it has faced in identifying and deploying overseas deals independently.”

Having traditionally relied on foreign managers, KIC’s engagement with domestic financial institutions is expected to inject new vitality into Korea’s PEF sector, which has been subdued by regulatory constraints. The partial relocation of investment mandates from foreign to local managers could help Korean firms expand their presence in global markets. Established under the Korea Investment Corporation Act in July 2005, KIC manages $206.5 billion in assets as of the end of last year, ranking 14th among the world’s major sovereign wealth funds.