Lime investors to lose over half of principal

Investors in two funds of Lime Asset Management, a South Korean hedge fund that fell from grace on a deluge of scandals, are expected to lose over half of their money, according to redemption plans issued Monday.

Investments in two master funds -- Pluto FI D-1, dedicated to privately placed bonds, and Tethys II, which targeted mezzanine instruments – were frozen due to illiquidity last year. Their total value will fall to a combined 534.7 billion won ($439.18 million) according to the plans, having had a combined market value of 1.2 trillion won at the end of October.

This contradicts an earlier estimate made in a due diligence by Samil PricewaterhouseCoopers, which said that investors could get back up to 65 percent of their investments in Pluto FI D-1 and 77 percent from Tethys II.

The fund redemption will begin as early as the second quarter, with three rounds expected this year, Lime Asset said. The exact figure is subject to change, Lime Asset added.

Lime Asset did not unveil the exact redemption rate -- tied to the market value of the funds as of March -- or the detailed schedule for the complete redemption, which depends on each feeder fund’s maturity date.

Of the total, 38.5 percent of Pluto FI D-1’s frozen assets and 12.1 percent of the Tethys II assets will reach maturity no later than the end of 2020.

Lime Asset could not immediately be reached for comment.

The news came two months after Lime Asset wrapped up its due diligence on the two master funds.

Lime Asset did not disclose a redemption plan for funds involved in its Ponzi scheme and fraud, such as Pluto TF-1, Credit Insured 1 and Credit Insured TF-1. The results of due diligence on the troubled master funds is also under wraps.

By Son Ji-hyoung (consnow@heraldcorp.com)