[Edaily Marketin, Reporter YunJi Kim ] As the domestic private equity fund (PEF) industry moves to launch an official federation, attention is turning to the practices of relevant associations in major overseas countries. This reflects a trend toward drawing on the operational models of countries with well-developed private equity industries as the new federation defines its role and functions.

Overseas, organizations representing PEFs are actively working to improve market practices—not only by responding to regulations but also by establishing information reporting standards between asset managers and institutional investors. It remains to be seen whether the new domestic federation will go beyond simply representing the industry’s voice to expand its role—such as by establishing common industry standards, as is done overseas.

Domestic PEFs Ahead of Federation Launch… A Look at Overseas Examples

According to the investment banking (IB) industry on the 29th, the Private Equity Fund Managers’ Council held its annual general meeting the previous day and resolved to dissolve the existing council and establish the tentatively named “Korea Private Equity (PE) Federation.” With the goal of launching in January of next year, the federation plans to go through relevant procedures, such as obtaining approval from financial authorities. The plan is to transform the council—which has operated as an informal organization—into a formal legal entity to better represent the industry’s interests.

This decision comes amid intensifying discussions on tightening PEF regulations following the Homeplus crisis. As the National Assembly debates amendments to the Capital Markets Act—which include regulations on leveraged buyouts (LBOs) and strengthened internal controls for fund managers—the need for a unified industry-wide response has grown. Simply put, the goal is to establish an official channel for communicating with financial authorities by consolidating the opinions of individual fund managers.

While the domestic PEF industry is preparing to launch an official federation, industry associations overseas are already playing various roles. The United Kingdom has been particularly notable this year. The UK Private Equity and Venture Capital Association (BVCA) changed its name to “UK Private Capital” last January. While this did not alter the association’s legal status or operational structure, the new name encompasses the private capital sectors it has traditionally represented, including private equity (PE), venture capital (VC), and private lending. With approximately 600 member firms, the organization participates not only in policy consultations with the government and financial regulators but also in establishing common industry standards.

These activities are also helping to reduce the administrative burden on the industry. On the 20th, UK Private Capital, together with the UK Enterprise Bank and Reframe Ventures, announced a plan to standardize environmental, social, and governance (ESG) reporting formats for the venture capital industry. The aim is to reduce information asymmetry between fund managers and institutional investors while alleviating the burden on fund managers of having to repeatedly submit similar materials to meet the requirements of different investors. Institutional investors will also be able to compare investment status more easily through the unified format.

Europe Establishes Common Standards; the U.S. Faces Regulatory Lawsuits

This trend is also leading to cross-border cooperation. Invest in Europe, the European private equity association, and France Invest, the French private equity association, also announced revisions to their existing ESG reporting formats on the same day. The three associations—including UK Private Capital—plan to harmonize their differing reporting standards to reduce the burden of duplicate reporting on asset managers and make it easier for institutional investors to compare investment information.

There have also been instances where industry groups have directly voiced their concerns to regulatory authorities. In 2023, when the U.S. Securities and Exchange Commission (SEC) tightened regulations on private equity funds, the American Investment Council (AIC) joined forces with other financial investment industry groups to file a lawsuit. At the time, the SEC had introduced regulations expanding the requirement for asset managers to regularly disclose information on fees, expenses, and investment performance, while also restricting preferential treatment for certain investors. The industry pushed back, arguing that the SEC had introduced regulations that exceeded its legal authority.

The court ruled in favor of the industry. In June 2024, the U.S. Court of Appeals for the Fifth Circuit invalidated the regulations, ruling that the SEC had exceeded its legal authority. The court explained that while the SEC cited investor protection, it had failed to sufficiently demonstrate how the stricter regulations would contribute to preventing fraud or deceptive practices. The joint response by six industry groups, including the AIC, ultimately led to the regulations being invalidated.

Meanwhile, many believe it will take time for the domestic private equity fund (PEF) industry to expand its role in the same way as overseas associations. Unlike overseas markets, the domestic industry has only just begun the process of establishing a formal federation, so it needs time to coordinate the interests of member firms and determine specific directions for its activities. An official from the domestic capital market stated, “While the U.S. and the U.K. have operated official associations for a long time and expanded their roles to include establishing industry standards, Korea is just taking its first steps.” The official added, “Although responding to regulations is the most urgent priority for now, the scope of the federation’s activities will likely depend on how well member firms can unite their efforts in the future.”