Lime admits to near 50% loss ratio, leaving little for retailers after liquidation

2020.02.14 14:57:22

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Korea’s liquidity-short hedge fund Lime Asset Management Co. admitted nearly half has been lost in some of the funds it had been suspending withdrawals and that there would be little left for retail investors after institutions get their hands on their share first.

The loss rate for two Lime funds – Pluto FI D-1 and TethysⅡ, which invested in privately placed securities and mezzanine debts, is estimated at 46 percent and 17 percent, respectively as of Feb. 18, Lime Asset Management said Friday.

The outstanding assets of the two troubled funds that have suspending withdrawals were estimated at 937.3 billion won and 242.4 billion won as of Oct. 31 last year, meaning investor losses would reach 472.3 billion won, nearly half of the total.

What is worse, three feeder funds tiered to the two – Lime AI Star 1.5Y-1, 2 and 3 – were managed with total return swap (TRS)-based leverages, giving access to institutions first in what’s left, according to the company.

Last October, Korea’s largest hedge fund halted withdrawals from three funds –TethysⅡ, Pluto FI D-1 and Pluto TF-1, after investors rushed to take their money out following news of a regulatory probe into its risky trading activities. It was suspected of illegally trading convertible bonds of listed firms with non-listed companies in collusion with large-sized houses to increase returns.

Total outstanding assets of the three came at an estimated 1.67 trillion won. Lime’s direct investment took up an estimated 930 billion won, with TRS-based leverage around 670 billion won.

By Lee Ha-yeon

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