The Era of Giants Ends, the Age of Systems Begins: The Start of Infinite Survival Competition [PE 2.0]③

Number of Newly Registered Management Firms Hits Triple Digits in Three Years, Market Expands Rapidly
Large Firms Command 70% of Committed Capital, Widening Polarization
Non-Management Participation Investments Surge as Traditional M&A Slows
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Editor's NoteAs the history of private equity funds (PEFs) in Korea surpasses two decades, the succession from first-generation founders to the next generation has been taking place across the industry. Until now, the discussion has largely focused on "who will be the next leader." However, succession in PEFs is not simply about handing over titles. The real issue is whether organizations—once centered around a single founder—can continue to operate after that founder steps aside. The Asia Business Daily will explore, in a three-part series, the current state of generational change in Korea's PEF market, the different types of succession models, and the changes the industry will face as a result.

Last year alone, 100 new private equity fund (PEF) management companies were registered. Behind these numbers are the people who left their previous companies. Early this year, former MBK Partners Vice President Lee Jinha established his own asset management firm, while others from STIC Investments and IMM have also launched new companies. These are people who left firms that had revolved around a single leader to start ventures under their own names. Not only has the number of PEF management companies increased, but the flow of capital has also become more concentrated. Amid this generational shift, the industry is facing not just the personnel issue of appointing successors, but also a survival race arising in the aftermath of the founder-centric era.

More Fund Managers, but Capital is Concentrated: "Expansion Amid Polarization"

The PEF market continues to expand relentlessly, even amid fierce competition. According to the Financial Supervisory Service, the number of PEF management companies (GPs) grew from 336 in 2020 to 455 by the end of last year. With 100 new registrations, the total returned to triple digits within three years. Newly created funds also reached 211, and new commitments amounted to a record 27.8 trillion won.

However, the direction of capital flows is diverging. The 45 largest GPs took 68.7% of all commitments in 2025, while the 247 small GPs—more than half the market—accounted for only 4.3%. While the number of GP companies increased across all sizes year-on-year, large GPs were the only group to expand their share based on commitments. The Financial Supervisory Service analyzed that "competition is expected to intensify further, given investors’ preference for large GPs and the influx of new GPs."

The intensification of competition is changing not only the numbers but also the very methods of making money. As the traditional mergers and acquisitions (M&A) market slows in growth, investments that involve taking over and actively managing companies have declined. Management-participation investments shrank from 32.5 trillion won in 2023 to 23.7 trillion won last year. In contrast, non-management-participation investments—such as lending to companies or investing through mezzanine structures (which combine features of both stocks and bonds)—surged from 300 billion won to 4.4 trillion won in two years, increasing more than tenfold. The number of funds executing these investments jumped from 14 in 2023 to 90 in 2025.

The Financial Supervisory Service noted that "this reflects increased demand for medium-risk, medium-return assets outside of traditional equity investments," adding that "investment strategies are becoming more diversified." Asset management firms that once relied on the simple formula of "buy low, sell high" are now seeking their own paths to survival in a cooling market.

From Founder’s Intuition to Organizational Systems: Changing Survival Criteria

The first generation of PEF founders succeeded in an era of low interest rates and leverage. It was a time when financial engineering—buying assets cheaply and selling high—and relationships or networks could secure deals. As that environment changed due to high interest rates and excessive competition among asset managers, survival now depends on operational capabilities, sector expertise, and the ability to withstand more rigorous investor scrutiny.

In the era when first-generation founders landed deals through strong networks and intuition, their personal charisma defined the competitive edge of their firms. However, in an environment where high interest rates, valuation pressure, management company oversupply, stricter scrutiny from limited partners (LPs), and activist investor pressures all operate simultaneously, it is no longer feasible for a single founder’s judgment to drive the organization. What is required now is operational capability, sector expertise, institutionalized investment decision-making, and transparent governance.

Whereas the core of PEFs in the past was acquiring management control, leveraging, and cost efficiency, today, specialization, large-scale operations, and multi-strategy approaches are all simultaneously required. Hahn & Company is preparing to operate a real estate-dedicated fund through a new entity, HCAM, this year. This move is seen as an effort to expand into alternative investments, as traditional buyouts alone are no longer sufficient to drive profit and growth. Similarly, VIG Partners and IMM Private Equity are launching and growing subsidiaries specializing in private credit, following the same logic.

Above all, this is not just about expanding the product lineup; it is a strategy to highlight the ability to systematically manage multiple strategies for LPs, including buyout, credit, real estate, infrastructure, and mezzanine. When exits become blocked, firms naturally consider alternatives such as continuation funds or secondary sales, while needing complex strategies to fill profit gaps stably with credit investments.

The expectations of LPs have also changed. After the Homeplus incident, major institutional investors have begun to scrutinize ESG (environmental, social, and governance), responsible investing, and internal control standards more closely in the GP selection process. Financial authorities and major domestic LPs are considering including compliance staff and internal control systems as evaluation criteria at the investment review stage. This marks an era where GPs are no longer evaluated solely on their ability to source good deals. Operating invested companies, managing conflicts of interest, and effectively communicating with LPs and the market have become new standards of competitiveness.

A PEF management company executive said, "When the market was just opening and growing, simply securing good deals guaranteed significant carry (performance-based bonuses), but now the industry is saturated with fierce competition," adding, "LPs have become more discerning, and with the Commercial Act amendments and increased activism, investment strategies have become more complex."

Wide and Diverse Exits Overseas, Narrow Gateways in Korea: "Nevertheless, Gradual Evolution Underway"

Ironically, this increasingly complex environment is what drives generational change. The fact that founder-driven intuition and networks no longer work means it's time to transition organizations into systems. Building operational capabilities, sector expertise, and institutionalized decision-making processes ultimately involves sharing authority and rewards with the next generation. As covered in Parts 1 and 2, equity transfers and changes in LP stakes marked the beginning of this process.

The problem is that this generational shift happens only in limited forms in Korea. As previously discussed, only two firms have brought in external capital. In other words, the founder’s exit options are limited. Overseas, the gateways are wider and more diverse. There is already a pool of GP stake-specialized capital that acquires shares in management companies. Blue Owl GP Strategic Capital, launched in 2010, manages assets worth about $70.6 billion. In 2021, Blue Owl listed on the New York Stock Exchange, and Petershill on the London Stock Exchange, further expanding exit channels through IPOs. This is why global PEFs like Blackstone and KKR have been able to release founder-held shares to the market while retaining management control.

The situation is different in Korea. There is virtually no market for buying stakes in management companies. The cases where STIC Investments sold shares to external capital, and Centroid Partners brought in a major insurance company as a shareholder, are seen as "exceptional." Because exit options are limited, generational succession naturally takes place internally. However, this closed structure does not mean progress has stopped. Efforts to transfer equity internally, share decision-making, and empower the next generation are taking place throughout the industry. The transition from the founder’s era to the age of systems has only just begun.

The head of a PEF management company said, "Over the past 20 years, the best talent in Korea has flocked to this market, and the accumulated human capital is proof of the rapid growth of Korean PEFs in a short period." He added, "It is clear that the market is growing and the survival race is intensifying, but even in this competition, the industry’s growth will continue."

This content was produced with the assistance of AI translation services.