Korea's KDB widens gap in VC fundraising in H1; NPS to fund in July

The capital commitments of state-run Korea Development Bank (KDB) have widened the gap for South Korean venture capital firms in fundraising over the past five months. Market insiders are closely watching the moves of National Pension Service (NPS), the world's third-largest pension scheme, which will expand the gap further with a maximum of 350 billion won ($255 million) commitment as early as July.

KDB tapped Seoul-based PE houses Premier Partners LLC and JKL Partners Inc. last week for a 150 billion won commitment to each manager. The investment firms won a competition among large PE managers to back local ventures in their growth or later stages. 

Each PE manager has to create at least a 500 billion won fund by the end of this year to secure the KDB commitment. To do so, they need to raise more funds from institutional investors amid the frozen capital market in Korea.   

Premier and JKL, alongside Korea Investment Private Equity, are also competing for an 80 billion won commitment from the Export-Import Bank of Korea (KEXIM). The state-owned bank will choose one of the three local big-name firms as early as next week.

As KDB and NPS are the two biggest investors in domestic PE and VC funds every year, asset managers strive to win their commitments, which can facilitate funding from other institutional investors, said banking industry sources.

WAITING FOR NPS' CHOICE 

NPS' choice of domestic PE managers will be another key factor in their fundraising performances this year. 

The pension fund has tapped North Asia-focused MBK Partners and will hire up to three more firms as early as next week to commit a combined 100 billion won-350 billion won capital.

Not only small PE managers but also big names will find it difficult to raise around 350 billion won in the second half of this year amid institutional investors' tepid interest, a banking industry source said.

Among the bidders for NPS' fund is Praxis Capital Partners, which stood out for its sale of Doosan Robotics Inc. shares for 120.8 billion won last year, about six times the purchase price in 2021. The VC firm, aiming for an 800 billion won blind pool fund creation this year, lost out in the competition for KDB funding.

LOSERS, SMALLER WINNERS

Centroid Investment Partners, a nine-year-old buyout firm, failed in capital raising from KDB and KEXIM. 

Market insiders said the firm lacked a successful exit performance, despite major deals such as its 1.9 trillion won acquisition of US golf equipment maker Taylormade Golf Company Inc. in 2021 and its purchase of 18-hole golf course South Springs Country Club for about 172 billion won in 2020. 

Q Capital Partners, a mid-sized VC firm, stands out in terms of large institutional investor funding. It received a 90 billion won commitment from KDB and has won KEXIM's approval for its small and mid-cap investment proposal. 

Corstone Asia, the Korean affiliate of US investment firm Corstone, received a 200 billion won commitment from KDB for mid-sized companies. The Korean PE manager aims to exceed 1 trillion won in assets under management by creating its third blind pool fund with a maximum of 300 billion won.

Write to Jong-Kwan Park at pjk@hankyung.com

Jihyun Kim edited this article.