KIC bullish on PE continuation funds, tech venture deals
Korea Investment Corporation (KIC) is seeing value from continuation vehicles (CVs) within private equity, at a time when private equity firms or general partners (GPs) are challenged on exits, according to Huh Yoonhyuck, senior managing director and head of private equity group at KIC.
These opportunities are being explored while the sovereign wealth fund continues its search for attractive venture capital (VC) opportunities in its regional offices around the world, he told delegates at AsianInvestor’s 16th Institutional Investment Forum Korea in Seoul on June 21.
“CV is positive, because these are trophy assets that GPs have owned for years with additional upside. GPs will also roll over their carry or put additional capital to align interest with the new investor base,” Huh said on stage.
Historically, continuation vehicles have been used in situations where a manager or sponsor is unable to sell a problematic or distressed asset at the end of the fund’s life.
That has been a more common scenario in recent years due to the rise in interest rates, making leveraged deals less attractive and halting new purchases of private equity companies.
More recently, continuation vehicles have also been designed to enable managers to retain their well-performing assets as their existing funds near the end of their terms, allowing for later exits at more optimal times. Continuation also allows existing investors seeking liquidity to cash out of their investments.
The GPs will typically also commit to the continuation fund — often using the carried interest earned from the existing fund — to ensure better alignment with its investors, or limited partners (LPs).
TECHNOLOGY FIRST
While KIC has added the CV approach to its private equity strategy, the sovereign wealth fund is looking at new sectors to expand its search for attractive VC investments.
“We're also trying to have a more aggressive stance toward the VCs in the most prospective sectors where we also engage in direct investments,” Huh said.
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With an office in San Francisco near Silicon Valley, KIC is especially bullish on new trends across technology-related sectors.
“AI is ahead of the pack, but we are also interested in sectors like FinTech, cyber security, and SpaceTech,’ Huh said.
To help search for attractive private market assets more broadly, KIC also opened an office in Mumbai in April.
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"The new branch office in Mumbai is expected to play a pivotal role in finding quality investment opportunities in alternative assets, particularly in private equity, including venture capital, and real estate and infrastructure, in the country," a KIC spokesperson told AsianInvestor in January.
The office in India’s financial hub is the Korean wealth fund's first office in emerging markets. On top of Mumbai and San Francisco, KIC also has overseas offices in New York, London, Singapore, and San Francisco.
KIC’s total assets under management (AUM) were valued at $189.4 billion as of end-December, 2023. Private market assets, or alternative investments, accounted for 22% of total assets at the end of 2023. The sovereign wealth fund aims to raise that share to 25% by 2025.
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