South Korea's Financial Supervisory Service convened an emergency meeting with domestic securities firms on Friday, urging them to prepare contingency plans amid growing concerns over private credit fund investments.
The regulator summoned approximately 20 executives from 10 securities companies, including compliance officers and private credit fund managers, in a meeting chaired by Vice Governor Kim Wook-bae.
Private credit fund sales to Korean investors have surged from 11.8 trillion won in 2023 to 17 trillion won last year. Retail investor holdings alone jumped 3.2 times during the same period, from 115.4 billion won to 479.7 billion won.
The FSS warned firms against overemphasizing monthly dividends and high yields in their sales practices. The regulator noted that the illiquid nature of these assets makes it difficult to detect borrower distress early, potentially leading to underestimated risks.
The warning comes as global private credit markets face mounting pressure. Blackstone's private credit fund BCRED received redemption requests totaling 7.9% of assets, raising alarms across the $1.8 trillion global private credit industry. Blue Owl Capital recently sold $1.4 billion in assets from three funds to meet redemption and debt obligations.
The FSS indicated it may conduct individual inspections of securities firms with significant exposure to these products.
Meanwhile, Korean markets suffered their worst two-day decline on record, with the KOSPI plunging 18.43% amid geopolitical tensions. Foreign investors sold a net 19.58 trillion won over nine consecutive trading days, triggering circuit breakers on both the KOSPI and KOSDAQ for the first time in two years.
The won weakened past 1,500 per dollar for the first time since March 2009.
