South Korea's National Growth Fund completed the selection of fund managers for rounds 1 and 2 this year, with 18 private equity firms securing anchor investor status in a 200 trillion won policy fund over five years. Round 1 allocated 3.9 trillion won to 11 general partners from 81 applicants (7:1 competition ratio), while round 2 distributed 1.6 trillion won to 7 general partners from 65 applicants. The competition stemmed from the symbolic value of policy fund anchor status, which facilitates private limited partner fundraising in challenging market conditions. The fund targets advanced industries including AI, semiconductors, secondary batteries, bio, defense, and robotics.
National Growth Fund Allocates 5.5 Trillion Won to 18 Private Equity Firms
Round 1 selection results allocated the large league to Skylake Equity Partners and Atinum Investment. The M&A league went to Welltoci Investment, while the AI and semiconductor (mid-sized) segment was awarded to Daishin Private Equity and Intervest. The KOSDAQ league was secured by the Mirae Asset Venture Investment and Brain Asset Management consortium.
Round 2 results awarded the scale-up league to Stick Investment. The mid-sized league was distributed among Dominus Equity Partners, Woori Venture Partners, and Korea Investment Partners. The AI and semiconductor (small-sized) segment went to SL Investment, while the regional-exclusive segment was allocated to SBI Investment and the KB Securities-Ecopro Partners consortium.
Notable rejected applicants included Affirma Capital, which did not pass the first-stage screening for the scale-up league. J&N PE competed until the final stage but was not selected over Stick Investment.
Industry sources noted that the fund's focus on advanced strategic industries led to scrutiny of fund managers' nationality and governance structures. Qualitative assessments of suitability to manage policy funds played a significant role beyond quantitative scoring criteria. An investment banking industry source stated that selection guaranteed fund formation because private limited partners line up to invest once a manager is chosen, unlike private blind funds where formation feasibility is uncertain.
Management Fees Range 0.8–1.0% as Policy Anchor Status Drives GP Competition
The National Growth Fund's effective management fee rates are estimated at approximately 0.8–1.0% depending on the league. For a 500 billion won large league fund, the annual management fee cap is approximately 4.1 billion won, which reverse-calculates to a fee rate of approximately 0.82%. A 300 billion won fund calculates to approximately 1.0%. These rates are lower than the typical 1.5–2.0% management fees for private blind funds.
Fund managers competed intensely for the symbolic value of policy fund anchor investor status. Securing anchor investments from Korea Development Bank and the Advanced Strategic Industry Fund facilitates subsequent private limited partner recruitment. In this year's challenging fundraising environment, the title of National Growth Fund general partner serves as significant reference credentials. The opportunity to build track records in AI, semiconductors, bio, defense, and robotics investments also attracted participants.
The scale-up league drew particular industry attention. The structure involves a 200 billion won anchor investment from Korea Development Bank to form a minimum 500 billion won fund, with no hard cap on private capital fundraising. Industry participants anticipated that selection would attract trillion-won-scale capital far exceeding the target amount.
Investment Restrictions and Profitability Concerns Emerge Among Industry Participants
Industry participants expressed concerns that excessive competition may negatively impact profitability. The National Growth Fund's policy objectives require investments in specific sectors including AI, semiconductors, secondary batteries, and bio. Multiple fund managers are likely to target similar industries and growth-stage companies simultaneously. A private equity fund manager stated that limited high-quality investment targets combined with multiple policy funds competing simultaneously could inflate entry valuations and ultimately lower returns.
The absence of major fund managers from the competition reflects similar reasoning. Excluding MBK Partners (affected by the Homeplus situation), large buyout houses including Han & Company, IMM PE, and VIG Partners did not actively participate in the National Growth Fund. Industry sources cited these firms' lack of urgent need for policy fund anchor status as the primary reason. Firms already managing trillion-won-scale blind funds found the symbolic value attractive but had relatively weak incentives to accept operational autonomy constraints.
Investment restrictions and public oversight burdens also deterred participation. The National Growth Fund constrains managers' ability to invest at desired times, in desired industries, and with desired structures. Policy objective compliance requirements are accompanied by post-investment reporting and disclosure burdens. The fund's focus on advanced strategic industries subjects both investment processes and exit results to public scrutiny from markets and policy authorities.
A private equity industry source stated that VIG Partners is considering the National Growth Fund investment program, but Han & Company is not considering participation at all. The source explained that houses for which the policy fund general partner title was important now face the burden of intense competition alongside deepening concerns about profitability.
FAQ
What is the total size of South Korea's National Growth Fund?
The National Growth Fund is a policy-driven growth capital platform with a total size of 200 trillion won to be formed over five years. This year's rounds 1 and 2 allocated 5.5 trillion won combined (3.9 trillion won in round 1 and 1.6 trillion won in round 2) to 18 selected private equity fund managers.
Why did private equity firms compete intensely for National Growth Fund selection?
Firms competed for the symbolic value of securing policy fund anchor investor status from Korea Development Bank and the Advanced Strategic Industry Fund. Selection facilitates subsequent private limited partner fundraising, particularly in challenging market conditions. The title of National Growth Fund general partner serves as significant reference credentials, and managers gain opportunities to build track records in advanced industries including AI, semiconductors, bio, defense, and robotics.
