South Korea commits $350m to private equity

The country’s $133bn pension fund has pledged $350m to two Asian private equity funds as it looks to commit $7bn to the sector over the next five years.

South Korea’s National Pension Corporation, the operator of the country’s $133 billion (€110 billion) public pension plan, has pledged $350 million to two domestic buyout funds as part of its plan to significantly increase its exposure to the private equity asset class.

According to a statement released by H&Q Asia Pacific, the NPC has committed $200 million to a Korean-focused buyout fund led by the private equity firm, which has formed a consortium with Korean financial institutions Hyundai Securities and Wise Asset Management. The H&Q-led fund is looking to raise up to $400 million.

In addition to H&Q, the pension scheme also pledged $150 million to Shinhan Private Equity, an affiliate of the Shinhan Financial Group.

We believe the Korean economy offers many attractive opportunities for late-stage private equity investors.

Ta-lin Hsu, founder, H&Q Asia Pacific

The two private equity commitments come approximately two weeks after the NPC, which had not been an active investor in the asset class, announced plans to invest up to $7 billion in buyout and venture capital funds by 2010, a decision that was made as part of an overall effort to diversify the pension fund’s portfolio and increase returns. Last year, the pension generated an overall return of 8 percent compared to 7 percent the prior year.

The investments in the two funds also come at a time when Korea is again emerging as an attractive region for both foreign and domestic private equity firm. Despite recent ‘investigations’ of Lone Star and The Carlyle Group by Korean tax authorities, a number of new funds are being raised which will target the region. MBK Partners, a new Asian private firm launched by former Carlyle partner Michael Kim that will target Korea, as well as Japan and China, is currently raising a fund estimated between $1 billion and $1.5 billion. Another buyout firm, South Korean start-up Bogo Investment announced last week that it was also looking to raise up to $1.5 billion by next year for investment in Korean companies.

In a statement, Ta-lin Hsu, the founder and chairman of H&Q Asia Pacific, noted: “We believe the Korean economy offers many attractive opportunities for late-stage private equity investors.”