Why Is KB Invest Considering How to Utilize 30 Billion Won from the National Pension Fund?

National Pension Venture Fund Management Fee Rate Set at 0.1%

[Asia Economy Reporter Kwangho Lee] Although KB Investment secured additional funds by being selected as the general partner (GP) for the National Pension Service venture fund investment project, it has become difficult to utilize these funds as planned.

According to the investment banking (IB) industry on the 10th, KB Investment has effectively abandoned its plan to increase the size of the ‘KB Scale-up Fund No. 2’ established last November. Initially, they intended to multi-close the fund at a scale of 180 billion KRW by adding 30 billion KRW secured from the National Pension Service, but this has become impossible.

Previously, KB Investment obtained GP qualification in the scale-up category of the first regular investment project of the Korea Venture Investment Corp’s mother fund last year. With KB Financial Group affiliates participating as major limited partners (LPs) centered on the mother fund, the general meeting of the fund was successfully completed. The lead fund manager of the fund is Executive Director Hyungjun Kim of KB Investment. In addition, Executive Director Sewoong Oh and others were named as key operating personnel.

After forming the KB Scale-up Fund No. 2, KB Investment also secured funds from the National Pension Service. They competed with SV Investment, Lindemann Asia Investment, BNH Investment, Daily Partners, Medici Investment, Partners Investment, and others. For KB Investment, this was a significant achievement after a long time.

Although it was a simple task to add additional funds to the existing 150 billion KRW scale KB Scale-up Fund No. 2, a ‘management fee rate’ issue arose. In the case of venture funds, management fees and performance fees are received as compensation for fund operation. Management fees are received annually as a certain percentage of the total committed amount of the fund.

Generally, the management fee rate for venture funds is around 2%. When focusing on achieving policy goals or when the scale is about 30 billion KRW, a 2.5% rate is mainly applied. Although there have been fluctuations, most have maintained a rate in the 2% range. The Korea Venture Investment Corp mother fund, a major LP of the KB Scale-up Fund No. 2, also applies a 2% rate.

However, in the case of the National Pension Service, a management fee rate of 0.1% was set. The typical management fee rates for the National Pension Service’s investment projects are 2% for amounts up to 50 billion KRW, 1.2% for amounts up to 100 billion KRW, and 0.8% for amounts up to 300 billion KRW.

From the perspective of existing LPs, it is difficult to accept a management fee rate of 0.1%, which is lower than the usual 2%. Therefore, KB Investment is considering forming a separate fund without attaching the 30 billion KRW from the National Pension Service to the existing fund.

A KB Investment official said, “Although the management fee is lower than the usual level, we proposed a fee structure that satisfies both LPs and GPs by offering a relatively high performance fee payment rate.”

This content was produced with the assistance of AI translation services.