이 기사는 2020년 02월 11일 08:00 thebell 에 표출된 기사입니다.

Korea Growth Investment Corp. (K-Growth), the country’s fund of funds operator, is set to boost private equity direct secondary investment this year, in a bid to both facilitate exit activity in the South Korea’s venture capital market and to enhance its return.

K-Growth has earmarked 29.4 billion won ($24.7 million) for private equity direct secondary investments this year, an increase from 24.5 billion won for 2019. Apart from this, it also plans to allocate 30 billion won ($50 million) of anchor commitment to a 60 billion won fund dedicated to investing in limited partnership interests in private equity funds.

Secondary funds acquire interests in private equity funds, including venture capital funds, on a secondary basis. This provides liquidity to limited partners in a highly illiquid asset class.

In South Korea, it is an early stage of secondaries, with the first secondary fund launched in 2014. Currently most of the secondary funds in the country are managed by venture capital firms. This could raise concerns about conflict of interest when venture capital funds try to sell limited partnership interests to a secondary fund run by a firm in competition with them, because they need to disclose the portfolio holdings. This has been one of the reasons for the lackluster activity in the country’s secondary market.

However, K-Growth, which manages funds of funds, is not constrained by such concerns. It can review the portfolio holdings in various funds managed by domestic venture capital firms and make secondary purchases whenever attractive investment opportunities arise. Also, with increasing secondary investments, K-Growth seeks to enhance its return, as this has been the case in the developed market.

K-Growth started to invest in secondary investments in 2019, when two transactions were completed by the fund of funds operator.

“The development of the private equity secondary market is crucial for facilitating exit activity, but there have been many obstacles including concerns about conflict of interest,” said an industry insider. “Expectations are high for K-Growth entering the [secondary] market as a key player.”

(By reporter Lee Youn-jae)