This article was published on May 29, 2025, at 2:13 p.m. on the ChosunBiz MoneyMove site.
The National Pension Service (NPS), a major player among private equity fund (PEF) operators in Korea, has set an internal policy not to invest more than 100 billion won in a single project fund, which is a fund that solicits investors for designated investment targets. This decision comes after instances where several hundred billion won were invested in project funds, leading to a risk of losses.
While reducing investments in project funds, the NPS has also reportedly decided to significantly cut the capital amount for blind funds (funds that are formed without defining investment targets) to be announced soon for the second half of the year. Instead of increasing domestic alternative investments with high uncertainty, the NPS aims to increase the proportion of overseas credit investments.
According to the investment banking (IB) industry on the 29th, the NPS recently informed several private equity fund operators that it will not invest more than 100 billion won in a single project fund. Instead, it plans to distribute funds in the hundreds of millions won range evenly among multiple operators' project funds.
The reason behind the NPS establishing such an internal policy is due to instances where it invested several hundred billion won in project funds but could not execute an exit (recovering investment funds). Notable cases include the online commerce company 11Street and Homeplus.
The NPS invested 350 billion won in 11Street in 2018. However, the major shareholder, SK Square, abandoned the call option for the equity of shareholders, including the NPS, at the end of 2023, resulting in 11Street being put up for sale but failing to find a new owner so far.
The NPS's investment in Homeplus occurred earlier in 2015. When MBK Partners acquired management rights, it bet 582.6 billion won through redeemable convertible preferred shares (RCPS) and 29.5 billion won in common stock. Currently, Homeplus has entered the rehabilitation process, and industry insiders believe that substantial losses for the NPS are unavoidable.
The problem is that the NPS's reduction in project fund investments could aggravate the funding crunch in the private equity fund market. In fact, it is reported that firms attempting to engage in buyouts through project funds are generally experiencing financial difficulties due to the absence of blind funds. There are also cases where they have been selected as preferred negotiation partners but are unable to finalize the contract (Share Purchase Agreement - SPA), leading to withdrawals.
An IB industry insider noted, "Recently, many investors (LPs) are hesitant to become anchor investors in project funds," adding, "I understand that preference is being given to loan deals over equity investments, which are being consistently rejected."
A private equity (PE) insider stated, "This is a critical time, especially with the upcoming presidential election, which makes it burdensome for the NPS to invest large sums in domestic corporations that attract attention." They added, "That's why the NPS is reducing domestic investments and increasing allocations to overseas credit. "
According to industry sources, the NPS is also expected to reduce the scale of its entrusted management business to be announced soon. Typically, the NPS selects three to four private equity firms each year to invest between 100 billion and 350 billion won. Generally, notices are issued in April, and management firms are selected between June and July. However, this year, as May comes to an end, no announcements have been made.