South Korea’s National Pension Service (NPS) plans to invest total 1.95 trillion won in domestic alternative assets this year.
NPS, the country’s biggest public pension fund, announced on March 27 its plan to select external managers for an alternatives strategy in the domestic market. Specifically, it plans to invest 800 billion won and 150 billion won in private equity and venture capital, respectively. It also intends to commit up to one trillion won to so-called Corporate Partnership funds where an institution invests in a partnership with a domestic company.
For private equity and venture capital strategies, managers will be selected through competition. NPS will choose five private equity firms, with 80 billion to 200 billion won expected to be committed to a fund managed by each firm. Meanwhile, a total of four venture capital firms will be selected, with each expected to receive 30 billion to 60 billion won from the pension scheme.
There are some conditions attached to the pension fund’s investment. Among firms that previously received commitments from the NPS, those that deployed less than 60 percent of its committed capital are not allowed to submit a proposal. Any duplicate application is forbidden either, so firms only can choose one between private equity and venture capital categories. The pension fund also specified that it won’t allow firms to serve co-general partners.
NPS will contribute up to 50 percent of a total committed capital of the fund, with the general partners required to contribute at least two percent of it. For private equity funds, the fund’s life needs to be no more than 10 years with the investment period of up to five years. For venture capital funds, the fund’s life cannot exceed eight years with the investment period of up to four years.
The announcement included a tentative timeline for a process of selecting private equity and venture capital managers. The pension fund will select private equity managers first, with applications due on April 29 and the final outcome expected to be announced before the end of June. Applications for venture capital managers will be due in August, with the final results expected to be available in October.
With regard to Corporate Partnership funds – or more commonly known as COPA funds – the pension fund plans to partner with about two domestic companies to invest a combined one trillion won. Any companies seeking to launch such funds need to meet certain conditions, including a credit rating of at least A-.
The life of the COPA fund cannot exceed 10 years with the investment period of up to five years. The pension fund accepts applications throughout the year. (By Han Hee-yeon)