Seoul: The chief of the country's financial watchdog announced that his agency will investigate risks linked to private equity funds (PEFs), emphasizing that illegal and unfair practices by certain PEF operators could severely compromise market principles.

According to Yonhap News Agency, during a meeting with leaders from a dozen PEFs, Lee Chan-jin, governor of the Financial Supervisory Service (FSS), stressed the necessity for PEFs to operate in accordance with market principles. He acknowledged, however, that public intervention might be necessary when certain entities disrupt market order and jeopardize investor protection.

Lee stated, "(We) will deal with (such problems) strictly in accordance with laws and principles. In order to minimize the burden on markets, we will look into areas on which risks are centered, instead of adopting universal regulations." His comments follow allegations against MBK Partners, a prominent domestic PEF, for allegedly offloading short-term debts of its wholly owned retailer, Homeplus, around the time the retailer's credit rating was downgraded.

MBK Partners had acquired a complete stake in Homeplus in 2015 from British retailer Tesco Plc for 7.2 trillion won (US$4.9 billion). However, Homeplus faced financial difficulties due to a downturn in the discount store sector and eventually underwent court-led rehabilitation proceedings in March of the previous year.

Lee further encouraged PEFs to contribute to productive finance and intensify their efforts to reinforce market confidence. As of 2024, 1,137 PEFs had committed capital totaling 153.6 trillion won (US$103.9 billion), as reported by data from the FSS.