Yellow Umbrella, South Korea’s mutual aid association for small and mid-sized business owners under the Korea Federation of Small and Medium-sized Business (KBIZ), has begun a process for its private equity (PE) allocation for the second half.
Yellow Umbrella is internally discussing details of its PE allocation for the second half and plans to issue a notice in August, according to industry sources on July 14.
In January, Yellow Umbrella selected three PE firms as its blind-pool fund managers to invest a combined 60 billion won ($50 million). Among nine applicants, Yellow Umbrella picked LB PE, Lindeman Asia Investment and KTB PE as its PE managers. Starting from this year, Yellow Umbrella will choose alternative managers twice a year, not just once.
In its previous PE allocation in the first half of this year, Yellow Umbrella removed a qualification requirement in which candidates had to previously secure a certain level of commitment from other domestic institutions, allowing more firms to submit proposals. Market insiders said the qualification requirement for the latest selection process isn’t likely to be strict either.
It has set the fund’s hard cap at 200 billion won in the first half, while a maximum fund size is expected to be raised in the latest selection process. Yellow Umbrella may also introduce a league system under which PE firms are split based on their sizes.
However, market insiders said that the possibility of introducing the league system is not high as Yellow Umbrella is likely to prioritize PE firms’ stability when choosing its managers amid heightened uncertainties due to the Covid-19 pandemic. The National Pension Services has also focused on PE firms’ stability in its latest round of PE allocation.
In 2019 KBIZ separated its asset management unit from the Mutual Aid Fund Division to elevate it to an independent division, accelerating efforts to enhance the competence and independence of the asset management team since chairman Kim Ki-mun took office last year. (Reporting by Byung-yoon Kim)