Teachers’ Pension, which is currently in the process of selecting external alternative managers, has decided to postpone the procedure in response to the coronavirus outbreak, the first such case among domestic institutions, raising concerns about the impact of the virus on private equity fundraising.
Teachers’ Pension, a South Korean pension scheme for private school educators, has recently notified PE firms that submitted proposals for its alternative investments portfolio last month that due diligence and presentation competition will be postponed to April, sources familiar with the matter said on Tuesday.
The pension fund initially planned to complete all procedures this month and select three PE firms through the discussion in its investment committee in April. According to the original plan, information about a timeline for due diligence and presentation competition should have been shared with candidates around the middle of this month.
The pension fund reportedly considered ways to minimize in-person contact at first but ended up moving the schedule to April, taking a wait-and-see approach amid the fast spread of the deadly coronavirus. It has informed candidates that all procedures will be done before the end of April, but has not provided a detailed timeline.
However, it remains to be seen whether this will be possible because one month is too short to complete all the remaining steps – including due diligence, presentation competition and the final discussion in the investment committee – considering the time normally required for such procedures.
Teachers’ Pension plans to invest total 150 billion won in three PE funds, with each expected to receive 50 billion won. This amount is larger than average, as capital commitments made to each fund through investment programs of other domestic institutions range from 20 billion won to 40 billion won.
That was one reason why the pension fund’s investment program drew strong interest from PE firms. Last month the pension fund closed applications and received eight proposals, with a competition rate of one out of almost three. (By Rho Ar-rum)