New York-based private credit investor Deerpath Capital Management will consider launching another Asia-Pacific office next year after establishing a foothold in South Korea last month, Private Debt Investor has learned.
The direct lender appointed Innchul Oh, a former senior manager for private equity at Hyundai Marine & Fire Insurance, in September, affiliate title Private Equity International reported at the time. Oh has been named head of investor partnerships for Korea and will be responsible for investor relations with a focus on domestic institutions, as well as building a local team.
Korea could mark the first of multiple outposts in Asia-Pacific, Oh told PDI, noting that firm also has investor relations staff in Brisbane, Australia. “We only invest in the US, but we raise capital from investors around the globe,” he said. “We expect to open another office in either Singapore or Tokyo in 2023.”
Deerpath already has existing relationships with Korean institutional investors, Oh said. “There is demand for direct lending among the Korean LP universe, but it is also competitive among the direct lenders,” he added.
“Many Korean LPs have focused on direct lending funds covering the large cap or upper-middle market. On the other hand, Deerpath is targeting lower middle-market companies. We believe we are the largest direct lending firm focused exclusively on US lower middle-market sponsored lending, which gives us a real competitive edge in terms of dealflow.”
Deerpath typically invests in US mid-market companies with an enterprise value of between $50 million and $150 million that are owned by a private equity sponsor.
Raising capital from Korean LPs is no mean feat. As Albert Jun, a Seoul-based partner at Monument Group, noted in a June guest commentary on PEI, domestic investors often have extensive due diligence processes and a predilection for brand-name funds or strategies with shorter J-curves, like real estate, infrastructure and private equity secondaries.
“Korean investors are quite conservative, even the very experienced institutions,” Oh said. “That’s why investors in Korea like direct lending especially first lien, senior secured debt; they want to have exposure to the senior tranche of the capital structure, low volatility and strong covenants. A consistent track record and quarterly cash coupons are important among Korean LPs [and] one of the key considerations when they choose some GPs or products is low default rates with high recovery rates and very low realised loss ratios.”
Deerpath has been actively expanding its international presence this year, having launched a London office in June to better access European LPs. The office is led by Tania Kutner, head of European investor partnerships. Kutner joined from London-based placement agent Aerius Associates and previously held positions at Lloyds Investment and Commercial Banking where she worked in leveraged finance.