Korea scientists fund to commit $34 mn to BlueBay Asset’s Europe debt fund

Korea Scientists and Engineers Mutual-aid Association (SEMA) has committed €28 million ($34 million) to a European mid-market private debt fund of BlueBay Asset Management LLP, Europe’s fixed income investment firm, which is seeking to raise €3 billion for the new fund.

Three other South Korean institutional investors - Korea Post, National Agricultural Cooperative Federation and MG Non-Life Insurance Co. Ltd. - are considering committing to the blind-pool fund, a third of BlueBay’s private debt fund series, according to investment banking sources on Jan. 22.

The fund targets over 10% returns, compared to its two previous funds which have earned net IRRs in the 8% range per annum and reported zero losses in respective investments.

The new debt fund will lend senior loans to medium-sized European businesses of up to five times EBITDA (earnings before interest, taxes, depreciation and amortization) of a borrower and receive an interest rate of 7 to 9% a year.

It will also provide mezzanine loans of six times EBITDA of a business within the limit of about 5% of its investible capital in order to boost returns.

The private debt fund is different from a senior loan fund that BlueBay Asset had closed last year with more than $3 billion in commitments, the sources added.

It will expire after seven years, according to South Korea’s Financial News’ report.

London-based BlueBay Asset, wholly owned by Royal Bank of Canada, has gathered more than $7.5 billion for its European private debt funds over the past decade.

NH Investment & Securities Co. Ltd., a unit of National Agricultural Cooperative Federation, arranged the investment.

Shinhan BNP Paribas Asset Management and NH-Amundi Asset Management Co. Ltd. are launching domestic vehicles for the private debt fund.

Both companies are joint ventures between top South Korean financial services firms and French companies - BNP Paribas and Amundi, respectively.

SEMA, a 4.8 trillion won savings fund, began investing in global private debt funds in 2017 by committing $30 million each to two US-based asset managers - Golub Capital and Ares Management.

By Daehun Kim and Donghun Lee

daepun@hankyung.com