CVC diversifies Korean funding sources beyond NPS and KIC

CVC Capital Partners has raised more than $175 million from three South Korean pension plans for its record $24 billion buyout fund, diversifying funding sources in the country into the Korean Teachers’ Credit Union (KTCU) and the Public Officials Benefit Association (POBA).

For its eighth buyout fund that closed at 21.3 billion euro ($24 billion) early this month, CVC has secured $100 million in commitment from the National Pension Service (NPS), $75 million from the KTCU and an unspecified amount from the POBA, according to investment banking sources on July 15.

It was the first time for KTCU and POBA to participate in CVC’s buyout fund. The Europe-based private equity firm had received commitments only from the NPS and the Korea Investment Corporation (KIC) in South Korea for unknown reasons.

It is not yet known whether KIC participated in the latest fund.

That is the second largest private equity fund in the world after Blackstone Group’s $26 billion fundraise last year.

It will invest in large to medium-cap companies mostly in Europe and the US with a deal value of 150 million euros to 1 billion euros. The fund could be utilized to finance mega deals in Asia, as well.

The new vehicle surpassed its initial target of 17.5 billion euros, reflecting growing demand for alternative investments and driven by the high return of its predecessor fund.

CVC’s seventh buyout fund that raised 16.4 billion euros in 2017 has secured an internal rate of return of over 50% as of June, 2019, according to the sources.

Asian investors account for 19.5% of commitments to the latest CVC fund, following 41.1% from North America and 23.3% from Europe.

POBA is a $13 billion pension plan for local government employees, and KTCU has $25 billion of assets under management. Both pension plans have allocated 60% of assets to alternatives, while POBA set a target return on investments at 4.1% for this year.

With $79.6 billion of assets under management, CVC acquired a controlling stake in South Korea’s No.2 accommodation booking app operator for 340 billion won last year.

Write to Hyun-il Lee at hiuneal@hankyung.com