A total of 84 firms have submitted proposals for mandates in South Korea’s New Deal fund, but competition levels will vary between the different investment categories.
The mandates, which are being awarded by Korea Development Bank (KDB) and Korea Growth Investment Corp (K-Growth), are being contested by a range of private equity (PE) firms, venture capital (VC) firms and asset managers.
PE firms each applied for mandates for one of the three funding categories, which cover funds worth more than 120 billion won, funds worth less than 120 billion won and those for new deal growth. The category of funds worth less than 120 billion won is likely to be most competitive, with 37 PE and VC firms submitting their proposals.
KDB and K-Growth will award mandates worth a combined 210 billion won for the category, or a maximum of 42 billion won for each fund. Market insiders expect five to 10 firms to be selected, making a competition rate of 4:1 to 8:1.
The category of funds worth over 120 billion won is a lot less competitive, with only two PE consortia – WWG Asset Management and VL Investment, and BNW Investment and Kiwoom PE – and three VC firms submitting proposals. Both of the consortia reportedly plan to create a fund worth 150 billion won.
Each fund is expected to receive around 50 billion won, as 35% of the total amount will be contributed by KDB and K-Growth. KDB and K-Growth will allocate a combined 175 billion won to about three firms, making the competition rate less than 2:1.
“PE firms have flocked to the category of funds worth less than 120 billion won as it is less burdensome for them to create a fund,” said an industry source.
A total of 11 companies, including PE firms, submitted mandate proposals for the new deal growth category, which will experience fierce competition.
Each fund for the category has to be over 150 billion won, the largest amount among all fund categories under the scheme. KDB and K-Growth will award mandates worth a total of 270 billion won, with about three firms expected to be selected.
“The fund for the new deal growth category is likely to be most competitive among PE firms,” said an industry source, adding, “It is hard to predict the results because each PE has their own strengths in their track records.” (Reporting by Byung-yoon Kim)