Korean military fund to commit $30 mn to two US venture capital FoFs

  • 2017-06-02

The Military Mutual Aid Association (MMAA) will commit $30 million in aggregate to two US venture capital funds of funds in its first investment in a global venture capital fund, targeting annual returns of between 15% and 20%.

Korea Scientists and Engineers Mutual-aid Association (SEMA) has also decided to allocate an undisclosed sum to the two FoFs of Top Tier Capital Partners and Horsley Bridge Partners, according to investment banking sources on June 1.

Their commitment to the FoFs will be made via two South Korean asset managers which aim to raise around $70 million in total from domestic investors for the two FoFs.

hb_logo

Details are as follows:

Fund name Top Tier Venture Velocity Fund Horsley Bridge VII

 

Company Top Tier Capital Partners LLC. Horsley Bridge Partners
Total fundraising target $200 million $1.3 billion
Fundraising target in Korea $20 million Around $50 million
Korean fundraiser Hanwha Asset Management Co. Ltd. Kiwoom Asset Management Co. Ltd.
Investors MMAA ($15 million)

SEMA (undisclosed)

MMAA ($15 million)

SEMA (undisclosed)

Target IRR per annum Around 20% Around 15%
Investment targets VC secondaries/ primary investment in portfolio companies (focusing on firms at  post-startup stages) About 30 global venture capital funds which would invest in about 1,000 venture firms
Target regions North America (80%), others (20%) US, Europe and others

“Core technologies of the fourth industrial revolution such as artificial intelligence, Internet of Things and big data are creating synergies in full swing,” an MMAA source told the Korean Investors on the reason for making the investment decision.

Investing in FoFs will diversify its portfolios further and help build experience before making direct investment in global venture capital funds.

Valuation concerns across alternative asset classes also pushed MMAA, a $9 billion savings fund for South Korean military personnel, to look at venture capital investment, said Ki Pum Kim, a team manager of MMAA, in a panel discussion of the ASK 2017 Private Debt and Equity Summit on May 17.

Still, many other Korean asset owners remain hesitant about investing in global venture capital funds.

“It has been just three to four years since local pension and savings funds started venture capital investment,” said an alternative investment official of a South Korean mutual aid association. “We have multiple steps to pass before executing investment in global VC.”

Top Tier Capital, a venture capital investment firm, has raised $3.3 billion since inception, while Horsley has invested in about 7,000 companies through venture capital funds and FoFs.

By Daehun Kim and Taeho Kim

daepun@hankyung.com

<Edited by Yeonhee Kim>