GEPS taps Apollo, EQT, Warburg for buyout, growth equity

South Korea’s Government Employees Pension Service (GEPS) selected Apollo Global Management, Warburg Pincus and Sweden-based EQT Partners as its first managers for global buyout and growth equity portfolios early this week, according to sources with knowledge of the matter.

The three firms will receive a combined $120 million in commitment, or $40 million each.

It marked the first time for the GEPS to deploy capital to global buyout and growth equity funds since its inception in 1982. Its overseas alternative investments have been primarily exposed to infrastructure, private debts and secondary transactions.

Under the new mandate, Apollo will chase buyout deals in North America, while Warburg Pincus will target pre-IPO companies with a high growth potential in North America.

EQT will focus on buyouts in Europe.

The request for proposal attracted bids from 29 global private equity houses, including KKR & Co. and Blackstone.

Carlyle, Bridgepoint and Welsh, Carson, Anderson & Stowe (WCAS) made it to the shortlist, along with the three selected managers.

The GEPS is understood to prefer vehicles in their early stages of fundraising, rather than those in the final stages, because it is its first commitment to global PE funds, the sources said.

Despite the relatively small allocation size, investment bankers said the mandate is a good opportunity to build relationships with one of South Korea's top three pension schemes.

Compared with Western pension funds, the GEPS seems to have more room to raise exposure to private equity. Alternatives accounted for 35% of its assets under management of 7 trillion won ($5.5 billion) as of end-2022. 

Moreover, Apollo, EQT and Warburg are expected to enjoy the first-mover advantage as GEPS’ first global PE managers, while diversifying fundraising sources.

“GPs highly dependent on LPs in the US and Europe have realized that diversification of LPs is very important after experiencing difficulties in recent fundraising,” a private equity industry official said.

A GP refers to a general partner and an LP to a limited partner.

In 2021, the GEPS diversified into the overseas infrastructure segment through Goldman Sachs, Macquarie and Paris-based Ardian. It had committed a total of $105 million to the three investment firms at the time.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Yeonhee Kim edited this article.