South Korea’s Korea Development Bank (KDB) will start marketing its mezzanine fund in May targeting small and medium-sized enterprises (SMEs) in the technology sector.
The eight-year fund is aiming to raise KRW200 billion ($175 million; €165 million) from domestic institutional investors including pension funds, endowments and insurance companies. KDB will commit up to 50 percent of the total amount. The fund is expected to reach a close in August 2017.
The fund will invest in domestic SMEs with proven high technology, and will consider investing up to 30 percent of total commitments overseas if there are available opportunities.
“The KDB is a policy-bank owned by the government and therefore we are looking at the developing economy of Korea itself and trying to fuel the new growth engine of the country,” a spokesperson for KDB explained to PDI.
“In past years, we focused on investing in conglomerates and SMEs in Korea for restructuring and growing through mezzanine using our blind funds. Now we plan to raise another blind fund this year to reinforce our strength in mezzanine investments,” the spokesperson added.
The fund will look at seven to eight portfolio companies with a maximum deal size of 25 percent of the total corpus of the fund. It has a medium risk-return profile with an expected return between 8-15 percent.
The last mezzanine debt fund of the bank closed in 2009 with total commitments of $300 million. The previous fund was focusing on a mix of different sectors including consumer, manufacturing and energy.
Korea Development Bank is a state-run investment bank involved in four main businesses: corporate banking, investment banking, international banking, and corporate restructuring and consulting. It was set up to support the growth of core industries in Korea.