Only Three Firms Apply for Military Mutual Aid Association's 200 Billion Won Investment Project... Why?

Only Three Firms Apply for 200 Billion Won Mandate to a Single Manager
Co-Investment Structure Restricts Management Strategy
Favorable Terms for the Military Mutual Aid Association
Achieves Both Investment Scale-Up and Fee Reduction

The Military Mutual Aid Association announced a massive investment project this year, offering to commit 200 billion won to a single domestic private equity fund (PEF) manager, but only three firms applied. Industry observers note that the nature of the fund as a co-investment fund-of-funds, combined with restrictions on management strategy and low fee rates, led to limited interest from asset management houses despite the large scale.

According to the investment banking (IB) industry on April 14, only three managers applied for the Military Mutual Aid Association’s selection of a domestic PEF co-investment fund manager for 2026. The association initially planned to shortlist three firms after a document and quantitative evaluation process, but so few firms applied that a shortlist was unnecessary. Despite being a mega-investment on the scale of the National Pension Service or Korea Investment Corporation (KIC), with 200 billion won to be entrusted to a single manager, the project failed to attract much attention.

All managers that applied are reportedly affiliated with financial holding groups. General buyout fund managers did not apply at all. This is attributed to restrictions on investment strategy and eligibility. The investment project aims to select a manager who will co-invest in alternative assets alongside managers with whom the association has previously invested. As a type of fund-of-funds, at least 70% of the committed capital must be deployed into the primary investment objective.

There are also various other restrictions. Co-GP (co-general partner) arrangements are not permitted, and the GP must make a direct investment of at least 2% of the committed capital, which amounts to at least 4 billion won. The manager must also secure at least two key personnel with experience managing similar funds.

In addition, the management fee and other fee rates are expected to be lower than those of blind funds, which allow for more flexible investment strategies. This is because there is no need to source deals or structure transactions directly.

From the perspective of the Military Mutual Aid Association, this is an efficient way to increase the scale of investment. Previously, in November of last year, the association selected 20 domestic blind fund managers for a total of 480 billion won. By allocating 200 billion won to co-investment this time, the association can expand its overall investment size while reducing the total fees paid to managers.

An industry insider in the PEF sector explained, "For the Military Mutual Aid Association, this is a simpler way to increase investments than holding an investment review committee for every co-investment opportunity raised by managers selected last year. For managers affiliated with financial holding groups, where job rotations are frequent, the fee rates may be lower, but they can secure safer and more stable returns, which seems to have met the needs of both sides."

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