Attempts by the South Korean National Pension Service (NPS) to enhance returns in partnership with domestic enterprises seeking outbound investment have made little progress, although an increased interest by large companies to push into overseas markets points to more partnerships in the future.
A Corporate Partnership Fund, more commonly known as COPA fund, is a program introduced in 2011 to help South Korean companies seek overseas mergers and acquisitions. The fund can be launched with two investors – one company and one institution, such as a pension fund and credit union – committing 50% each of the total fund size.
NPS has partnered with several companies across varied industries on COPA funds for the last nine years. They included GS Engineering & Construction (GS E&C), Korea Electric Power Corporation, KT&G, Pulmuone and CJ Group. However, most of the cash has sat idle with few notable exits.
A COPA fund that was launched by NPS and GS E&C in 2012 invested 70 billion won ($61 million) in Spanish water treatment company Inima, which was acquired by GS E&C for 350 billion won the same year. NPS exited the investment in the company, now known as GS Inima Environment, in 2019 by exercising the put option as granted under the agreement because of the delayed initial public offering of the company (IPO). The exit gave NPS principal and interest at a compounded annual rate of 3.84% only.
Two investments have been made from a COPA fund launched by NPS and KT&G in 2011. One in a Chinese ginseng product manufacturer and the other in an Indonesian tobacco company. NPS made an exit from the former again by exercising the put option – not via other routes such as a sale and IPO – while the latter is yet to be exited. The fund’s life will end next year.
NPS also participated in the $50 million acquisition of Vitasoy USA’s assets by Pulmuone in 2016 through a 400 billion won COPA fund launched alongside the food company in 2014. The investment also has not been exited.
Meanwhile, CJ Group has started seeking a buyer for CJ Rokin, which is one of CJ Logistics’ Chinese subsidiaries. The logistics company acquired about 72% stake in Rokin for 455 billion won in 2015, with the acquisition cost partly financed by a 1 trillion won COPA fund launched by CJ Group and NPS. If successful it would mark the first exit through a sale for deals made from NPS COPA funds.
Despite slow investment and exit by COPA funds, many South Korean conglomerates remain interested in the funds, indicating their strong desire to expand into overseas markets to find new growth drivers, industry watchers said. Most recently, SK Group launched a 1 trillion won COPA fund with NPS in 2019 to invest in Vietnamese conglomerate Vingroup. (Reporting by Hye-ran Kim)