Pension fund money pours into National Growth Fund; 500 billion won matching fund within reach [fn Market Watch]

[Financial News] The Pension Fund National Growth Matching Fund, which uses pension fund money to support the formation of National Growth Fund sub-funds, is expected to grow to as much as 500 billion won. With a cumulative 500 billion won in new capital flowing into the Pension Fund Investment Pool this year, Korea Growth Investment Corporation (K-Growth) plans to add more parent funds and broaden the fields eligible for investment. The matching capital, initially expected to total 100 billion–300 billion won, is set to increase substantially, easing the burden on National Growth Fund general partners (GPs) of securing private investors.
According to the investment banking (IB) industry on the 12th, K-Growth revised and reissued its plan to select delegated managers for the “Pension Fund National Growth Matching Fund,” first announced on June 10. Under the blind-fund structure of “National Growth Fund Matching Investment,” the number of parent funds providing capital has increased to two: the “Pension Fund National Growth Matching Fund” and the “Pension Fund (Public) National Growth Matching Fund.” The two parent funds will jointly provide capital.
The fields eligible for investment have also been broadened. A “matching field,” to which the Advanced Strategic Industries Fund will jointly contribute, has been added to the existing areas of ecosystem-wide support and support for specific objectives. Eligible funds are sub-funds whose managers have been selected by the National Growth Fund and that can provide subordinated capital to a pension fund parent fund. The contribution for each fund will be 20% of its total size, up to a maximum of 30 billion won. However, the actual amount may vary depending on the level of participation in the Pension Fund Investment Pool. Managers must invest at least 60% of the minimum fund size in small and midsize companies in South Korea’s innovative-growth sectors. Funds must be formed by December 31 this year. If the formation deadline approved by the National Growth Fund differs, it may be extended in consultation with K-Growth.
The project-fund-style “Pension Fund Innovation Growth Fund” has also been changed to receive capital from multiple parent funds. Three parent funds—the Pension Fund National Growth Matching Fund, the Pension Fund (Public) National Growth Matching Fund, and the Pension Fund Innovation Growth Venture Fund—will contribute jointly. Eligible funds must offer investors downside protection, such as subordinated capital, put options, or guaranteed priority distributions when drag-along rights are exercised. Applications will be accepted and selections made on a rolling basis until the available capital is exhausted, and funds must be formed within four months of the final selection date.
The changes follow a faster-than-expected increase in capital flowing into the Pension Fund Investment Pool. The “Pension Fund National Growth Fund No. 1,” designed by Samsung Asset Management, the pool’s lead manager, together with K-Growth, was launched on June 9 with an initial contribution from the National Sports Promotion Fund. The Trade Insurance Fund then contributed about 80 billion won, bringing cumulative fundraising to 110 billion won just seven days after launch. It is the fastest that an alternative investment product in the Pension Fund Investment Pool has surpassed 100 billion won.
The capital flows through three stages. Participating funds contribute to the pooled fund “Pension Fund Integrated National Growth No. 1”; that fund invests in K-Growth’s sub-funds, which in turn contribute to the National Growth Fund’s sub-funds. This pooled-investment structure, which manages capital from multiple funds together, makes it easy for smaller funds to participate.
The government is also encouraging public funds to invest in innovative growth. The Ministry of Planning and Budget revised its fund management evaluation guidelines, doubling the evaluation bonus for investment in innovative-growth sectors from one point to two. The National Growth Fund was also explicitly named in the evaluation category for efforts to promote the public interest. The Pension Fund Investment Pool’s assets under management stood at 90.2 trillion won at the end of May, based on net asset value, putting it close to the 100 trillion won mark. This helps explain the successive launch of innovative-growth investment products, following Mirae Asset Management’s launch last August of the pool’s first venture investment product, the “LP First Step Fund,” with a value of 40.5 billion won.
The IB industry expects the increase to accelerate the formation of National Growth Fund sub-funds. The National Growth Fund is set to be built up to 150 trillion won over the next five years. The indirect-investment fundraising target for this year is 6.22 trillion won, of which private capital will account for 3.99 trillion won. In its “2026 National Growth Fund Management Plan,” the government substantially increased the share of contributions from the Advanced Strategic Industries Fund and expanded fiscal support in the form of subordinated capital. 
[email protected] Kang Gu-gwi Reporter