The Pension Foundation of the General Assembly of the Presbyterian Church of Korea is getting the spotlight as an emerging investor in the country’s private equity industry.
The foundation chose four general partners to commit total 40 billion won through the recent selection process that completed earlier this week. They are Stonebridge Capital, a consortium of SKS Private Equity and Korea Investment Private Equity (KI PE), LB Private Equity and IMM Investment, each of which will get 10 billion won commitment from the foundation.
Despite a relatively small amount of investment compared to that of other anchor investors like pension funds and mutual aid associations, the foundation’s process of selecting external alternative managers, which began last month, drew strong attention from domestic PE firms on the fundraising trail, in particular smaller firms suffering from raising capital, resulting in intense competition.
Indeed, both LB PE and Stonebridge Capital are in the process of raising money for new funds where Korea Growth Investment Corp. (K-Growth), a venture-focused fund of funds, and the state-run Korea Development Bank (KDB) invested as anchor investors. Meanwhile, a consortium of SKS PE and KI PE is raising a new fund – also backed by K-Growth and KDB – that will invest in businesses in the material, parts and equipment sectors.
The foundation initially planned to award mandates to alterative managers specializing in three areas of private equity and debt, infrastructures and offshore real estate, with total 19 proposals submitted. But most of the candidates included in the shortlist were private equity and venture capital firms.
This outcome seems to be largely due to higher scores given to PE and VC firms based on quantitative metrics. The foundation required each applying firm to propose a fund with a minimum size of 100 billion won and to secure capital commitments worth at least 30 percent of the total fund. It also considered other quantitative elements including applying firms’ financial position, track record and investment team.
The focus is on whether the foundation will continue to award alternatives mandates on a regular basis in the future. It started to allocate to alternative assets in 2017 and has since gradually expanded its exposure to the asset class in search of higher returns.
The foundation plans to keep its allocation to equities at less than 20 percent, while increasing investment in alternatives to 50 percent of its total assets. The foundation has only about three-year long history of investing in alternatives, and thus it will likely adjust its allocation depending on performance of its previous investments.
In 2018, the foundation awarded mandates to four alternative investment firms to allocate total 60 billion won, followed by 90 billion won investment in eight general partners in 2019. (By reporter Kim Hye-ran)