The units of NongHyup Financial Group, which include banking, brokerage and insurance businesses, will collectively commit $100 million to TPG’s seventh Asia-focused fund and $50 million to MBK Partners’ special situation fund (SSF), as they are seeking to become a key limited partner of global private equity firms.
Their collective commitments illustrated a shift in the South Korean financial group’s investment strategy to focus on selected funds and increase commitments, away from their past practices of each unit investing small amounts of capital in different PEFs.
“Once (the holding company) determines the total amount of commitment to a PEF, it receives commitments suggested by each unit and adjusts them to achieve the target amount,” said a NongHyup Financial source on April 30.
The seventh Asia-focused fund of TPG is targeting $4.5 billion in fundraising, while MBK’s SSF is seeking to raise $1 billion, according to investment banking sources.The TPG fund has already attracted investments from other South Korean banks and brokerage companies, including Kookmin Bank, Shinhan Bank, Woori Bank and Korea Investment & Securities Co. Ltd.
MBK Partners’ SSF led by partner Jay H. Bu is targeting real estate, minority stakes and distressed assets, rather than management buyouts.
IN SEARCH OF CO-INVESTMENTS
The move by NongHyup comes as South Korea’s pension and retirement funds are seeking to increase commitments to global investment firms through co-investment, or joint venture launch with the world’s largest pension schemes, with an aim to become major LPs.
Because of their smaller commitments than global rivals’, South Korean institutional investors were crowded out of competition for better-yielding alternative assets.
Major LPs of investment funds are often provided with co-investment opportunities, or investment banking businesses such as M&A financing and advisory.
“To be treated as a major LP by leading investment companies, they need to commit at least $100 million,” said a PEF head. “From the point of view of an investment company, we can provide better services when focusing on NongHyup Financial Group, rather than dealing with companies of the group separately.”
In November, units of Nonghyup Financial Group committed $100 million to an infrastructure fund of Brookfield Asset Management and secured a co-investment in a liquefied natural gas (LNG) terminal under construction in Texas.
It was the first equity investment in a US LNG facility by a South Korean financial investor.
NongHyup Financial Group is the financial holding company of South Korea’s national agricultural cooperative federation, or NongHyup, which is dubbed South Korea’s Credit Agricole.
Its assets combined with the parent NongHyup are close to 800 trillion won ($750 billion), greater than the National Pension Service’s 650 trillion won.
Their collective commitments to TPG and MBK were proposed by NH Investment & Securiteis’ CEO Young-chae Jeong who was installed earlier this year.
In April, Kwang-soo Kim, a former financial regulator and outside board member of Mirae Asset Global Investments Co. Ltd., took office as chairman of the financial holding company.
By Hugh YH Jeong and Daehun Kim
<Edited by Yeonhee Kim>
Photo: Getty Images Bank