이 기사는 2020년 03월 05일 08:00 thebell 에 표출된 기사입니다.

South Korea’s Military Mutual Aid Association (MMAA)’s hiring of external alternative managers seems to have fallen short of expectations despite strong interest from private equity (PE) firms.

According to the mutual aid association that manages money from South Korean career military officers on February 28, it has picked five external managers for private equity, including SkyLake Investment, Keistone Partners, Aju IB Investment, KTB PE and Dominus Investment.

The MMAA announced on December 30 2019 that it will kick off its investment projects in 2020 and has closed applications for its hiring of external alternative managers on January 10. According to the results, more than 10 domestic PE firms have submitted their applications.

The MMAA will invest a total of around 130 billion won in alternative assets through this project, with 100 billion won allocated to PE funds and 30 billion won to venture capital funds. PE investments are comprised of large-cap and mid-cap fund leagues, for which the association planned to select around two managers and three managers, respectively. The MMAA has made annual investments in blind-pool funds of external alternative managers since 2016.

The association initially planned to select external managers separately for each PE fund league, but ended up picking them regardless of the league. This was because only two firms - SkyLake Investment and H&Q Korea - applied for the large-cap fund league whereas the MMAA has to receive applications from at least four firms to make the competition workable.

An M&A industry source points out that the fund size was too large compared to the MMAA’s allocation. For the large-cap fund league, the association will earmark around 20 billion won for each fund, with a minimum fund size of 500 billion won.

“It is not easy to create a fund worth more than 500 billion won with commitments worth 20 billion won amid unfavorable fundraising environment,” said an M&A industry source, adding, “It seems that only firms that have received a lot of commitments out of 500 billion won have applied for the large-cap fund league.”

SkyLake Investment is currently raising funds to launch its eleventh blind-pool fund worth 500 billion won in the first half of this year. The PE firm was picked as an external manager by Korean Teachers' Credit Union (KTCU) and received 100 billion won worth investments in July 2019. H&Q Korea also is reportedly raising funds to create its fourth blind-pool fund worth a maximum of 600 billion won since last year.

“Compared to other investment projects, the MMAA’s project had a wider gap between the minimum fund size and the amount of allocation,” said a second M&A industry source, adding that the MMAA may need to consider issues such as current fundraising conditions. “Still, it seems to be positive that the association tries to separate its investment project into leagues. Considering it makes annual investments worth around 150 billion won, it seems more practical that the association separates its project into leagues such as mid-cap and rookie.”

(By reporter Kim Byung-yoon)