Korean government overhauls Green Growth Fund

The government has withdrawn its previous $14m commitment to the fund due to mutually ‘differing expectations regarding the timing and level of fundraising’ with the fund’s previous managers. It has re-awarded another three firms the right to manage the fund and committed a fresh $15m.

Korea’s Ministry of Knowledge and Economy (MKE) has replaced the managers of the country’s Green Growth Fund and downsized its target to $80 million from $130 million.

In June, MKE withdrew its proposed $14 million commitment from the fund’s previous co-managers, C Change Investments and Korea Investments & Securities Company (KIS), which had been selected to manage the cleantech fund in March. C Change was founded in November 2008 by Russell Read, the former chief investment officer of the California Public Employees' Retirement System. KIS is a Korean financial firm.
 
The fund had initally expected to hold a final close on $130 million by June, but market sources have said the fund’s former co-managers had difficulty raising that amount of capital in such a short time frame given tough global fundraising conditions.

“There were differing expectations regarding the timing and level of fundraising given the current market conditions,” C Change told PEO. This led to a mutual agreement resulting in MKE withdrawing its investment from the fund this June, the firm said, declining to comment further. KIS did not reply to requests for comment at press time.

Two weeks ago, the Korea Institute for Advancement of Technology (KIAT), a government agency under the MKE umbrella, re-awarded the right to co-manage the Green Growth Fund to private equity firms Korea Technology Investment Corporation, Benex Investment and Japanese investment firm SBI Holdings.

The fund is presently targeting a close on $80 million by the beginning of this September, a KIAT spokesman said. The target size is dictated by the managers, who entered a bidding process that constrained the minimum fund size to $80 million, he added.

MKE will commit approximately $15 million to the fund. Korea Technology Investment Corporation and Benex will raise 50 percent of the fund’s capital and SBI Holdings will raise the remaining 30 percent, the spokesman added. Korea Technology Investment Corporation, Benex and SBI Holdings did not reply to request for comment at press time.

Up in the air: Korea's
Green Growth Fund

The Green Growth Fund will make investments in energy-related sectors such as low-emission energy, LED applications, green transportation system and high temperature water treatment. Approximately 70 percent of the fund will be invested in Korean companies and the remaining will be invested in companies overseas. The fund has an average deal size of between $5 million and $20 million, the spokesman said.

The investment from MKE is part of a $100 million initiative called “New Growth Momentum”. The initiative was launched by the government in the beginning of 2009 to stimulate a slowing economy. Besides the Green Growth Fund, other funds in the initiative include the biotechnology-focused Bio Fund and the information technology convergence-focused High-Tech Convergence Fund.

As part of the programme, MKE has also committed $20 million each to Korean private equity manager STIC Investments and US-based Burrill & Co, which is focused on biotech and life science; a consortium comprising the Industrial Bank of Korea and private equity firm Auctus; and a syndicate comprising private equity firm KTB Securities and Singapore-based Kuwait Finance House. A total of 35 private equity firms, both domestic and foreign, applied for the funds.