S. Korean institutions seek PEFs for ESG-focused blind fund operation

2021.07.19 16:24:51 | 2021.07.28 18:03:29

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South Korea’s major institutional investors are increasingly investing in blind funds pooled by big and small private equity funds as they reach out to diversify portfolio.

According to multiple sources on Sunday, the Korean Teachers’ Credit Union will select private equity funds in a competition as early as late July, which will be consigned to operate its blind fund. Last week, candidate fund operators presented their management strategy and investment plans.

The Korean Teachers’ Credit Union gave notice in May to invest 475 billion won in a blind fund. It plans to name five private equity funds for blind funds worth 200 billion won ($174.6 million) or more and three rookie funds for those worth between 75 billion won and 200 billion won.

The selection of rookie funds aims to boost the growth of up-and-coming private equity funds aged under five years old. It is the first time in two years after 2019 for the credit union to invest in blind funds.

Like the Korean Teachers’ Credit Union, Korea Federation of SMEs created a separate category for rookie funds. It plans to invest 260 billion won in the private equity fund category, of which up to 20 billion won will be allotted to two rookie funds.

Federation of SMEs will receive proposals from PEFs until July 21. Dozens of private equity funds, meanwhile, have submitted applications.

Teachers Pension also plans to select up to four private equity funds for a 200 billion won investment. It stated higher points for those managers with experience and efforts in environmental, social, and governance (ESG) criteria. Market watchers say that private equity funds will have to consider including ESG in their blind funds as it is highly demanded by institutions.

National Pension Fund has completed its selection of a consignment operator for private equity funds early this month. It will invest 1.2 trillion won in private equity funds and co-investment funds.

The Military Mutual Aid Association also plans to give notice of its private equity fund investment project next month.

By Kang Woo-seok and Lee Eun-joo

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