Orchestra to launch debut Korea, Japan blind pool fund

The target will be USD 300m and most of the capital is expected to be raised from global LPs, according to a source close to the situation. The shift in strategy comes after Orchestra relocated its headquarters to Singapore and obtained a local fund management license from the Monetary Authority of Singapore (MAS).

The firm was founded by Jay Kim, previously a partner at The Riverside Company and a managing director at PineBridge Investments. He has compared the approach to that of Riverside in that Orchestra is a mid-market control-oriented investor. The goal is to buy Korean and Japanese businesses that have a strong growth story and support geographic expansion and add-on acquisitions.

Six investments have been made under project fund structures, whereby a separate vehicle is established for each investment and capital is sourced from a pool of frequent collaborators, typically financial institutions. However, having initially targeted Korean investors, Orchestra switched to a primarily international LP base last year.

For the acquisitions of Japan-based scaffolding provider Stack and the Korean franchise of KFC, a tax-exempt offshore structure was used to appeal to global investors. The blind pool fund will invest the majority of its capital in Japan and the rest in Korea, the source added.

Orchestra’s first deal-by-deal investment, which closed in 2017, involved the purchase of a 33% stake in Japanese golf equipment distributor Maruman & Co. and a 100% interest in its Korean subsidiary. The firm subsequently increased its holding in JASDAQ-listed Maruman & Co. to 51% through a tender offer.

Orchestra acquired Seoul Vision, a Korean post-production house for TV commercials, and Hong International, the largest global manufacturer of electronic dart machines, in 2018 and 2019, respectively. Hong International is based in Korea, but the private equity firm also took ownership of its distribution business in Japan.

Banolim, Korea’s fourth-largest pizza delivery business, followed in 2021. The fundraising for that transaction took about six weeks and for the first time featured family offices as well as the standard collection of financial institutions. Nevertheless, international investors became the focus for Stack and KFC Korea. The latter deal, worth about KRW 60bn (USD 48.8m) is set to close in March or April.

Project funds are a familiar feature of the Korean market. Their rise has been propelled by the emergence of a new generation of GPs and a relaxation in regulations making it easier to set up asset management firms as well as a general wariness of blind pool funds from a local institutional investor base that has a lot of capital to put to work.

However, fundraising became more difficult in 2022. Elevation Equity Partners took the standard three months to accumulate capital for its acquisition of genetic testing business Dx&Vx, but the intensity of the process was heightened. The firm spread its net far and wide, visiting the likes of family offices, banks, and some corporates, as traditional institutional LPs pulled back.

Gordon Cho, Elevation’s founder, noted that many Korean investors have deployed a lot of capital in the last couple of years and have yet to see returns. Moreover, a lot of Korean pension plans effectively function as cooperates and not only take contributions from members on an optional basis but also lend money. In 2022, there were significant outflows.

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• Topics
• North Asia
• Fundraising
• Buyout
• GPs
• South Korea
• Japan
• Orchestra Private Equity
• Fundraising