The Export-Import Bank of Korea (KEXIM) is expanding investment in private equity.
KEXIM plans to invest 25 billion won ($20.15 million) in a blind-pool fund (K-BIO New Growth Fund) dedicated to supporting domestic bio-pharmaceutical companies seeking to expand to overseas markets. Another anchor investor in the fund is the Ministry of Health and Welfare (MOHW) which is investing 15 billion won through the state-run Korea Fund of Funds.
KEXIM and the MOHW will proceed with a competitive selection process to hire an external manager to manage the fund through June. The selected manager will need to have the fund closed within six months with 100 billion won or more in commitments.
KEXIM also plans to commit up to 75 billion won to Global BioHealth-K Fund, which will be launched to invest in domestic companies from the healthcare, information/communications and electrical/electronic sectors with an aim to help their overseas expansion.
KEXIM’s last investment in a blind-pool fund was in February 2018 when the bank made a capital commitment to a fund investing in the fourth industrial revolution companies seeking to expand its overseas business. There was no investment by KEXIM in a blind-pool fund last year.
In the second half of this year, KEXIM is expected to allocate funding mainly to project-specific funds, rather than blind-pool funds, with a focus on sectors that the government wants to promote. In 2019 KEXIM’s investments were mostly directed to the materials, parts and equipment sectors in line with the government’s efforts to grow companies from these sectors.
Last year KEXIM provided funds to Korea Midland Power which acquired a wind power project in Sweden. This was one of KEIXIM’s biggest investments for the year. “The deal was meaningful as it represented the first investment in the European wind power market by the Korean company. We also wanted to expand our connections in the region,” a KEXIM representative said.
KEXIM also participated as a limited partner in the 2019 acquisition of U.S.-based Momentive Performance Materials by a consortium made up of private equity firm SJL Partners and two strategic investors – KCC and Wonik QnC. The bank reportedly committed 30 billion won to SJL Partners’ MOM 1 PEF (private equity fund).
“Many private equity firms recently appear to have faced difficulties in raising capital due to reduced commitments from an existing pool of limited partners,” an industry insider said. “KEXIM’s potential allocation to project funds would be great funding opportunities for private equity firms with plans to invest in sectors that the government focuses on.”
Later this year KEXIM plans to participate as an investor in the government-led fund of funds dedicated to investing in distressed companies. The bank is also weighing up whether to commit capital to the PIS (plant, infrastructure and smart city) fund of funds. The Ministry of Land, Infrastructure and Transport is leading the launch of the fund of funds. It consists of three vehicles with each investing in plant, infrastructure and smart city sectors.
“KEXIM is expected to decide on whether to participate in the PIS fund and, if it does, which sector it will invest in by the first half of this year,” said another industry insider. (Reporting by Byung-yoon Kim)