Cosmetics Fund Emerges to Find Hidden Gems in K-Beauty

As K-beauty’s popularity drives domestic cosmetics exports to record highs, a blind fund exclusively investing in cosmetics companies has been launched. With cosmetics companies’ valuations soaring in both mergers and acquisitions (M&A) and initial public offering (IPO) markets, the financial investment industry is also taking notice of K-beauty’s growth trend.

According to beauty and financial investment industry sources on Oct. 21, DS Asset Management finalized the formation of a blind fund named DS-STI Next K-Beauty New Technology Investment Association at the end of last month. The fund raised a total of 11 billion won, with six institutional investors completing their commitment to invest by mid-month. It has a closed-end structure with a five-year maturity.

The fund’s distinguishing feature is its exclusive focus on cosmetics companies. DS Asset Management plans to limit investments to unlisted cosmetics companies from early to pre-IPO stages. The fund is expected to invest in about five companies, with DS Asset Management planning to soon complete due diligence on one company and execute the investment.

DS Asset Management is exploring potential investment targets in collaboration with Referee, a beauty creator group with over 400 beauty influencers. Referee is developing an index that tracks YouTube exposure for domestic cosmetics companies, which will be used to identify cosmetics companies with promising growth prospects.

A DS Asset Management official stated, “Recently, there’s been a notable increase in customers purchasing products used or recommended by beauty influencers. We’ve signed a memorandum of understanding (MOU) with Referee, believing that an entity with beauty influencers would have good insights into cosmetics companies. We plan to use this index to guide our investments.”

The emergence of a beauty-specialized investment fund is attributed to the recent explosive growth of K-beauty, which has yielded remarkable investment returns. For instance, Woori Venture Partners, which invested a total of 4 billion won in d’Alba Global (483650) in 2019, reaped dozens of times its initial investment. Similarly, HB Investment reported achieving a return of 24 times its initial investment through d’Alba Global.

A DS Asset Management official explained, “Cosmetics companies can see rapid sales growth due to the popularity or trend of specific products, but sales can also plummet quickly when trends change. Therefore, we believe it’s advisable to find companies in their early stages that have good future prospects, which is why we’ve created this fund.”