Korea Growth Investment Corp (K-Growth) will operate an investment stake acquisition program, a limited partner (LP) liquidation framework that takes over part of a fund’s stake to help general partners (GPs) and LPs exit more smoothly.
Industry sources said insiders have already been introduced to the program, which is designed to resolve liquidity issues that may occur during the management process for venture capital firms and private equity firms, and to provide market participants with various exit opportunities.
K-Growth has made four or five transactions in the past four or five years that involved the secondary trading of a fund’s stake. The firm created a separate investment stake acquisition team through its organization reshuffle earlier this year.
GPs encounter various situations during a fund management process, including having to sell remaining assets to liquidate a maturing fund despite it having further growth potential, and a situation where they can continue supporting growth in their investment company and generate additional profits through an extension of maturity.
LPs could also face challenges, including having to retrieve their investment due to unexpected internal and external factors, having to readjust a investment portfolio, or encountering special situations, including regulations or mergers and acquisitions.
K-Growth plans to study a fund’s assets and management status, negotiate prices and terms and conditions and the structure of deals so it can lead a transaction when LPs and GPs face such issues and request solutions.
The program will handle all transactions by securitizing a fund’s investment stake. This could include the creation of a new fund and acquisition of all assets from an existing fund, which would then be liquidated.
At least 60% of a fund’s assets must comprise domestic small and medium-sized enterprises, and investments of at least 50% of the fund size have to be completed. (Reporting by Hee-yeon Han)