Cash-hungry venture capital firms have scrambled for mandates from Yellow Umbrella, which could delay the overall selection process.
Yellow Umbrella, the mutual aid association under the Korea Federation of Small and Medium Business, is in the process of selecting managers to award mandates for private equity (PE) and venture capital (VC) investments. Proposals were due by August 13 and up to 200 billion won ($170 million) and 120 billion won ($102 million) have been allocated to PE and VC mandates respectively.
It plans to complete the process for VC mandates by this month and then select PE managers by October. However, there could be a delay in the overall timeline because nearly 50 VC firms, which were much more than expected, applied for 10 mandates, industry sources said.
The organization will likely announce the shortlisted candidates for VC mandates later this week. This means it would have less than 10 days for the next steps in the process – which include interviews and due diligence on managers – to complete the award by this month.
“It normally takes a month from the deadline for proposals to the announcement of the shortlisted candidates but more-than-expected number of applicants for VC mandates has apparently caused a little delay in Yellow Umbrella’s selection process,” said an official at one private equity firm in Seoul. “This could mean that the shortlisted PE managers will be put on a tight timeline.”
Yellow Umbrella is expected to announce the shortlist for PE mandates in early October after the three-day Chuseok holiday. Ten proposals were received for six PE mandates and most of the managers that applied are those selected by the National Pension Service to receive mandates totaling 800 billion won in June, according to sources. They include IMM Investment, JKL Partners, Macquarie Korea Asset Management and Glenwood Private Equity.
“Chances are high that these large managers will also win PE mandates from Yellow Umbrella because they have strong track records,” an official at another private equity firm said. (Reporting by Byung-yoon Kim)