Korea Development Bank in Seoul (Courtesy of KDB)
Capital commitment of state-run Korea Development Bank (KDB) has widened the gap for South Korean venture capital firms in fundraising over the past five months. Market insiders are closely watching the deicision of National Pension Service (NPS), the world’s third-largest pension scheme which will commit up to 350 billion won ($255 million) to local private equity funds as early as July.
KDB tapped Seoul-based PE houses Premier Partners LLC and JKL Partners Inc. last week for a 150 billion won commitment to each manager. The investment firms won a competition among large PE managers to back local ventures in growth or late stage.
Each PE manager has to create at least 500 billion won fund by the end of this year to completely secure the KDB commitment. To do so, they need to raise more funds from institutional investors amid the frozen capital market in Korea.
Premier and JKL, alongside Korea Investment Private Equity, are also competing for a 80 billion won commitment from the Export-Import Bank of Korea (KEXIM). The state-owned bank will tap one among the three local big-name firms as early as next week.
As KDB and NPS are the two biggest investors in domestic PE and VC funds every year, asset managers strive to win their commitments which can make funding from other institutional investors easier, said banking industry sources.
National Pension Service’s headquarters in Jeonju (Courtesy of Yonhap)
NPS’ CHOICE AWAITED
NPS’ choice for domestic PE managers will be another key factor of their fundraising performance this year.
The pension fund has tapped North Asia-focused MBK Partners and will hire up to three more firms as early as next week to commit a combined 100 billion won-350 billion won capital.
Not only small PE managers but also big names will find it difficult to raise around 350 billion won in the second half of this year amid institutional investors’ tepid interest, a banking industry source said.
Among the bidders for NPS fund is Praxis Capital Partners, which stood out its sale of Doosan Robotics Inc. stocks for 120.8 billion won last year, about six times its purchase price in 2021. The VC firm, aiming for a 800 billion won blind pool fund creation this year, has lost the competition for KDB funding.
LOSERS, SMALLER WINNERS
Centroid Investment Partners, a nine-year old buyout firm, failed in capital raising from KDB and KEXIM.
Market insiders said the firm lacked a successful exit performance, despite its major deals such as a 1.9 trillion won acquisiton of the US golf equipment maker Taylormade Golf Company Inc. in 2021 and the purchase of 18-hole golf course South Springs Country Club for about 172 billion won in 2020.
Q Capital Partners, a mid-sized VC firm, stands out in large institutional investors’ funding. It received a 90 billion won commitment from KDB and has won KEXIM’s approval for its proposal of small and mid cap investments.
Corstone Asia, the Korean affiliate of US investment firm Corstone, received KDB’s 200 billion won commitment for mid-sized companies. The Korean PE manager aims to exceed 1 trillion won in assets under management by creating its third blind pool fund with a maximum of 300 billion won.
By Jong-Kwan Park
pjk@hankyung.com
Jihyun Kim edited this article.
