The National Pension Service (NPS), South Korea’s largest institutional investor, may skip its domestic private equity commitment this year as it grapples with fallout from steep losses tied to its investment in the troubled hypermarket chain operator Homeplus Co., people familiar with the matter said.
The world’s third-largest pension fund initially planned to launch a new round of domestic private equity fund (PEF) commitments in September or October. But the process has been put on hold as the fund’s investment office focuses on internal reviews and parliamentary audits regarding its investment in Homeplus, the people said on Monday.
The schedule may be pushed back to late this year or early 2026.
The delay follows Homeplus’s court-led rehabilitation filing in March, which triggered widespread criticism over NPS’s risk management.
The pension fund invested nearly 600 billion won ($418.2 million) in redeemable convertible preferred shares (RCPS) of Homeplus issued when MBK Partners acquired the retailer for 7.2 trillion won from British retail giant Tesco plc in 2015.
Including accumulated interest, NPS’s stake value has swelled to about 1.1 trillion won, but much of it may prove unrecoverable as RCPSs are treated as mezzanine debts, which can be converted into equity under restructuring, analysts said.
Equity holders, or shareholders, are typically the last to receive anything in a Chapter 11 case and only if all higher priority claims, such as debts, are fully paid.
The Homeplus investment was part of one of Asia’s largest leveraged buyouts, financed with MBK’s 2.2 trillion won equity contribution, 700 billion won in RCPS and acquisition loans.
Now, prosecutors are investigating MBK’s management of the retailer after its abrupt court protection filing and multiple credit downgrades.
The chain has since been placed on open auction after failing to find a buyer through a stalking-horse bid.
RISK MANAGEMENT UNDER SCRUTINY
The controversy has put NPS’s investment division under intense pressure during a National Assembly audit, which kicked off Monday.
Its potential losses on the Homeplus RCPS investment have become a political flashpoint, with senior portfolio managers spending most of their time preparing for hearings rather than screening new deals.
“The entire fund management office has gone into defensive mode,” said one industry official.
Since 2015, NPS has typically selected three to four local private equity managers each year, committing between 100 billion and 350 billion won to each, for a total annual outlay of up to 1 trillion won.
Its commitments are seen as a coveted seal of approval in Korea’s private equity market, often helping shortlisted firms attract additional institutional investors.
With this year’s process in limbo, however, fund managers are bracing for disruptions to fundraising schedules.
“The political storm over a single failed investment has paralyzed decision-making at the pension fund,” said another Seoul-based private equity executive.
“If the delay drags on, it could have a ripple effect on the country’s entire fundraising schedules.”
NPS, which manages 1,304.5 trillion won in assets as of end-July, allocated 1 trillion won to four private equity managers, including MBK Partners, JKL Partners, Praxis Capital Partners and Premier Partners, last year.
By Gyeong-Jin Min
min@hankyung.com
Sookyung Seo edited this article.
