Korea Post seeks secondary PE funds

Oct 24, 2011

The $50 billion savings fund requests pitches in by October 31 to allocate a minimum of $30 million to a secondary private-equity fund.

Savings Bureau of Korea Post, one of the largest Korean government-controlled institutional investors, has announced its latest mandates for global secondary private-equity funds.

The Korea Post has two units: postal savings (with around $50 billion of assets) and postal insurance bureau ($30 billion), both under the supervision of the Ministry of Knowledge Economy. Together these units comprise one of the country’s most active institutional investors engaged in cross-border allocations, along with National Pension Service and Korea Investment Corporation.

The entity announced its intentions to go into alternative investments at an AsianInvestor conference in Seoul this July. This follows similar moves by the postal insurance division.

Korea Post is requesting proposals from eligible general partners, which means the fund in question must be registered with the Financial Supervisory Commission, or be able to register as a ‘qualified professional investor’.

The GP must have a fund with a minimum of $500 million in assets and a target investment rate of return of over 8%. It wants to invest over a long time-horizon, and is looking for funds with a maturity of 10-12 years and an investment cycle of five years. Korea Post is looking to make a minimum investment of $30 million, closing early next year.

Korea Post has also stipulated what it is willing to pay: a management fee of under 2% per annum during the investment period, and under 2% of the invested amount or average outstanding thereafter. The entity does say this is subject to market conditions. It prefers a performance fee of under 20% of excess returns above an 8% hurdle rate, and it also wants to see the GP commit to a return of over 1% (in other words, don’t lose money).

Korea Post has set a deadline for 5pm on October 31, Korea time. It intends to evaluate the submissions within 10 business days, line up presentations within 25 days, get internal approvals and conduct due diligence after 50 days, and sign a contract after 60 days.

Pitches should be made via fund managers' local legal distributor, in Korean as well as English. They should touch on track record in secondary PE, market outlook, and the GP’s service and reporting capabilities.