이 기사는 2020년 06월 16일 08시00분 thebell에 표출된 기사입니다

South Korea’s small and mid-sized mutual-aid associations and cooperatives have been hit hard by the coronavirus pandemic, with some major pension funds and mutual-aid associations dominating commitments to domestic projects.

A mutual-aid association with 500 billion won ($412 million) in alternative investment assets has recently attempted to participate in a domestic project-specific transaction although it ended up failure. A private equity firm has proposed the mutual-aid association to join the deal, but a major limited partner, who participated in the deal as an anchor investor, has provided most of equity and acquisition financing, taking the mutual-aid association’s investment opportunity.

“We were in the final stage of reviewing the target when we were informed that an anchor investor is going to provide most of the investment,” said an official of the limited partner. “It was too bad, but we had to scrap our plan.”

Alternative investment teams of domestic small and mid-sized mutual-aid associations and cooperatives are open, but practically no business is done. Fewer project-specific PE funds are launched due to the Covid-19 pandemic amid a large amount of dry powder in the PE fund market.

Normally, domestic small and mid-sized mutual-aid associations have committed between 10 billion won to 30 billion won to project-specific funds, where major limited partners including Korean Federation of Community Credit Cooperatives (KFCC) and Korean Teachers' Credit Union (KTCU) participate as anchor investors. But anchor investors’ commitment to project funds have increased sharply while PE firms are contacting larger pool of limited partners, including mid-sized companies, according to PE industry sources.

“Cases of mutual-aid associations providing equity and acquisition financing for project-specific funds are recently increasing,” said a PE industry source. “Accordingly, the number of investment opportunities for small and mid-sized mutual-aid associations has decreased significantly.”

Against this backdrop, it remains to be seen whether small and mid-sized mutual-aid associations will be able to continue their investing activities amid the Covid-19 situation makes due diligence more difficult.

Small and mid-sized mutual-aid associations and cooperatives’ investment performance for 2020 is expected to depend on the number of project-specific PE funds created in the second half of this year, which is likely to increase.

“There has been practically no investment over the last six months,” a cooperative official said. “Considering many PE firms are planning to make project-specific transactions in the M&A market in the second half of this year, we looking forward to make commitments to those deals.”

(Reporting by Ik-hwan Choi)