이 기사는 2020년 01월 10일 08시00분 thebell에 표출된 기사입니다

South Korea’s state-run lender Korea Development Bank (KDB) and the nation’s fund-of-funds operator Korea Growth Investment Corp. (K-Growth) has kicked off the process to select external managers to create funds to support materials, parts and equipment sectors.

The latest investment project is composed of two parts: blind-pool funds and project funds. KDB will form blind-pool funds while K-Growth will create project funds. KDB will hire two investment firms while K-Growth will accept applications from fund vehicles on a rolling basis to allocate capital when the need arises.

The blind-pool funds aim to invest in companies in materials, parts and equipment sectors. Such companies should account more than 60 percent of a fund size. KDB and the state allocate 120 billion won in aggregate to two external managers. The size of each fund has to be more than 100 billion won and less than 200 billion won.

A management fee will be paid depending on the fund size. The management fee is set at two percent for a fund worth less than 50 billion won, 1.5 percent for a fund worth less than 100 billion won and one percent for a fund worth more than 100 billion won. If the fund size is 100 billion won, the management fee will be set at 1.75 percent or below.

A performance fee will be paid if the fund’s internal rate of return (IRR) exceeds the hurdle rate of five percent. This level is lower than average venture funds, which normally target IRR of eight percent.

KDB and K-Growth will receive requests for proposals by the end of January. They will name two partners by the end of February after going through document review and interview process. Funds have to be closed within five months of the selection of the external manager.

Meanwhile, the government will allocate 100 billion, a maximum of 30 billion won to each project fund. Applicants are invited to pitch their own fund size and contribution amount depending on their situation.

(By reporter Lee Yoon-jae)