Competition to be selected as the National Pension Service (NPS)’ external private equity (PE) managers is expected to be fierce after the nation’s biggest public pension fund removed all sub-categories.
The NPS closed applications for external alternative managers for its private equity investments on April 29 and is reviewing the applications, according to sources on May 21.
The biggest public pension fund announced in March its plan to select external managers for an alternatives strategy in the domestic market. It plans to select PE and venture capital (VC) funds through competition in a specified period. The pension fund also plans to hire external managers for corporate partnership funds when applications are received. It will allocate a combined 800 billion won ($646 million) to five PE firms.
A total of 15 firms, about three times the number of available spots, submitted proposals to be selected as external PE managers. The competition among firms is likely to be fierce considering the number of applicants hired as the NPS’ external large-cap managers is normally twice the number of available spots.
Last year there were two sub-categories under the PE strategy – mid-cap PE funds and special situation and distressed (SS&D) funds. Ten PE firms submitted applications for mid-cap PE managers, with four firms expected to receive a combined 600 billion won. Six firms submitted their applications for SS&D funds and a combined 400 billion won was to be committed to three firms.
In 2018 there were three sub-categories under the PE strategy – large cap, secondary and non-performing loan funds.
This year, however, the pension fund has removed all sub-categories, allowing applying firms to decide strategies of funds as well as the size of them within a range of 80 billion to 200 billion won. The move is designed to give external managers greater autonomy in preparing their proposals.
After the document screening process the NPS will announce shortlisted candidates for the next round in early June, which will include due diligence and presentation competition. (Reporting by Hee-yeon Han)