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GP commitment to NPS co-investment funds drawing attention The pension fund required GPs to commit 20% or more of the target fund size in 2017

Translated by Ryu Ho-joung 공개 2021-03-22 08:14:44

이 기사는 2021년 03월 22일 08:01 더벨 유료페이지에 표출된 기사입니다.

The National Pension Service (NPS)’s plans to award co-investment mandates are drawing attention from private equity firms, with their eyes focused on the amount of invested capital that the pension scheme will require from general partners (GPs).

The country’s largest public pension fund is planning to select managers for private equity mandates including co-investments, industry sources said.

This is the second time that NPS is putting money into such funds after it awarded co-investment mandates totaling 400 billion won ($353.5 million) to Daishin Private Equity and a consortium of Shinyoung Securities and SK Securities in 2017.

The pension fund’s plans have attracted interest from many private equity firms, with some starting preparations for proposals already. A formal request for proposals (RFP) is expected to be issued later this month.

Private equity managers’ focus is on GP commitment. In 2017, NPS required general partners of co-investment funds to commit 20% or more of the target fund size. This contrasted with the at least 2% requirement for other private equity mandates covering mid-cap, venture capital, mezzanine and sector strategies, which were awarded alongside co-investments.

“NPS set a high GP commitment probably because it was the first attempt by the domestic institution to award co-investment mandates,” an industry insider said. “The pension fund seemed to have wanted general partners of the funds feel more responsible.”

At the time, the scope of the GP commitment included capital raised from affiliates of and parties specially related to applying firms as well as their fund managers. Therefore, the selection process was dominated by private equity arms of large financial services groups and received relatively low attention from independent private equity firms.

It is also closely watched whether NPS will allow a co-GP structure for co-investment funds, industry watchers said. Another industry insider said that structure “will lead to increased interest from independent private equity houses.”

“Discussions are underway about issuing a RFP for private equity mandates,” said an official at the NPS. “We are considering ways to encourage as many firms as possible to submit proposals.” (Reporting by Byung-yoon Kim)
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