South Korea’s leading hedge fund Lime Asset Management Co. has suspended payment on some of its maturing funds due to liquidity problems following hefty losses in derivatives backed by overseas securities.
Lime Asset Management said Tuesday it was deferring payment of 27.4 billion won ($22.8 million) to its investors in Lime Top2 Balance 6M funds, which their seller Woori Bank should be handing out upon maturity on Wednesday.
The funds allocated half of the assets to repo (repurchase agreement) funds and the other to its fund of funds Lime Pluto facing liquidity problems.
Investments in repo funds will be paid back first, and those in private debts later after the company cashes out in its portfolio, it added.
Lime Asset Management recently has struggled to repay on its funds amid soured investment sentiment against private equity funds and alternative assets after funds tracking the German 10-year government bond yield have incurred massive losses due to the plunge in the country’s interest rates.
The investment strategy of focusing on high-risk assets for higher yields has also made it difficult for private equity funds to cash out, experts say.
In July, investors in a derivate-linked securities (DLS) product that tracks German real estate assets did not get back their money worth a combined 13.7 billion won due to a delay in approval process. Another 88.2 billion won in its real estate fund to invest in Australia assets has not yet paid back to the investors.
Won Jong-jun, chief executive of Lime Asset Management, promised to make all-out efforts to prevent further losses to investors, saying that the company will make it sure that other maturing funds worth 120 billion won could be fully repaid “at the appropriate time.”
By Kim Je-lim and Lee Ha-yeon
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