Fund managers will gain greater autonomy under the Korean New Deal policies, with the government and state-backed lenders allowing participating firms to form either a blind pool fund or project fund under the 20 trillion won ($18 billion) program.
Being established over the next five years, the fund will be led by the state-controlled Korea Development Bank (KDB) and Korea Growth Investment Corp (K-Growth). The government and state lenders will contribute 3 trillion won and 4 trillion won respectively, with the remaining 13 trillion won to come from a private investors’ pool.
Venture capital firms are mostly focusing on a corporate investment fund, one of the three key pillars under the New Deal, which will be backed by a combined investment of 800 billion won from the government and state-backed lenders to create feeder funds worth 2.2 trillion won. They also plan to inject 200 billion won to create a 600 billion won infrastructure fund.
Participating firms may select any of six industries related to the New Deal policies: DNA (digital, network, AI), eco-friendly vehicles, new deal services, SOC and smart logistics centers and smart industrial complexes. The New Deal fund will make investments in companies and projects related to the project initiatives, with feeder funds under the corporate fund formed into either blind pool funds or project funds.
K-Growth and KDB have allocated 475 billion won to the corporate fund, more than half its total allocation, to create feeder funds worth a total of 1.3 trillion won.
Managers may invest in one of six industries related to the New Deal policies or in 18 of the 40 business areas specified in the New Deal investment guidelines.
The New Deal fund has a similar structure to the Growth Support fund, which is led by K-Growth. Co-investors of the fund include KDB, KDB Capital and K-Growth.
K-Growth created feeder funds worth nearly 2.94 trillion won by investing 930 billion won in 2018 and invested 850 billion won to create feeder funds worth 2.75 trillion won in the following year. The New Deal fund is expected to replace the Growth Support fund, which injected 9 trillion won into the venture capital ecosystem between 2018 and 2020. (Reporting by Yong-bi Yang)