Rising Interest in the National Growth Fund Scale-Up Three-Way Race... Who Will Prevail?

Stick Investment, Affirma Capital, and J&PE Face Off
Two Shortlisted Candidates to Be Announced End of June; Final Selection in July
Established Leaders vs. Emerging Powerhouses, Domestic vs. Foreign Players

Competition is heating up in the Scale-Up League, the second round of investments for the National Growth Fund. Stick Investment, Affirma Capital, and J&Private Equity (J&PE) are each highlighting their respective strengths, drawing keen attention from the industry as a three-way contest unfolds.

Yonhap News Agency

According to the investment banking (IB) industry on June 22, Korea Development Bank, which is overseeing the Scale-Up League for the National Growth Fund, is scheduled to announce a shortlist of two candidates for the second round of the Scale-Up League around June 29. After this, due diligence will be conducted immediately, followed by qualitative evaluation presentations, with the final management firm to be selected by mid-July. This is a fast-paced process, as the final decision will be made about one month after proposals were accepted on June 10.

Although the target fund size is 500 billion won, unlike other leagues, there is no hard cap on the total amount that can be raised. Since funds formed by the first-round National Growth Fund GPs attracted more capital than their targets, there are expectations that the Scale-Up League—with no hard cap—will see considerable demand from investors wishing to participate.

Currently, the asset management firms (GPs) that have applied to participate are Stick Investment, Affirma Capital, and J&PE. In terms of scale, Stick Investment and Affirma Capital have the advantage. Stick Investment is a first-generation, large homegrown private equity fund (PEF) manager. Affirma Capital, which was launched when the private equity division of Standard Chartered (SC) separated from the bank, is also considered a major firm, having managed multi-trillion-won funds overseas. Although J&PE is a relatively new player, it has rapidly grown to become a rising contender.

While Stick Investment and Affirma Capital may seem to have an edge purely in terms of size, industry observers suggest that size will not be a decisive factor in this round of investment selection. In previous alternative investment initiatives, the likelihood of successful fund formation was typically a key evaluation metric. However, since significant investor demand already exists for the National Growth Fund, such quantitative indicators as firm size are expected to have little impact. Instead, it is anticipated that the deciding factors will be investment track records and returns in advanced sectors such as artificial intelligence (AI), semiconductors, biotech, secondary batteries, and next-generation mobility.

As large, long-established firms, Stick Investment and Affirma Capital both have substantial experience investing in advanced industries. Stick Investment has consistently invested in high-tech areas such as Jaewon Industrial (secondary battery and semiconductor materials), Chaevi (electric vehicles), and H2 (next-generation energy). Affirma Capital has expanded its investments in advanced materials by acquiring business units like SK Nexilis's FCCL (Flexible Copper Clad Laminate) division, Toray Advanced Materials' FCCL division, and Gwangjin Chemical (semiconductor waste chemical recycling). J&PE has steadily invested in advanced sectors such as Hyundai Him's (high-efficiency eco-friendly ships), Jaeyoung Solutec (ultra-compact optical solutions and manufacturing robots), Soulbrain Network (secondary battery ionic liquid electrolytes), and TKG Huchems (high-performance advanced materials). Hyundai Him's, in particular, is cited as a successful investment case, with projections of returns exceeding four times the initial investment, even with conservative estimates.

This competitive bidding is also being viewed as a showdown between traditional powerhouses and emerging players, as well as between foreign and homegrown firms. Affirma Capital is a foreign-owned management company originating from SC Bank, while Stick Investment and J&PE are purely homegrown. However, there is some debate regarding the "nationality" of Stick Investment, as its largest shareholder recently became Miri Capital, a U.S.-based firm. At the same time, although Affirma Capital is foreign-owned, it has built an extensive operating history in Korea. Investments and management by country are handled independently by local partners, and Affirma Capital plans to emphasize its history of forming funds with domestic LPs and investing in Korean companies.

An IB industry official stated, "Since capital will flow in as soon as the management firm is selected, it is likely that qualitative indicators rather than quantitative ones such as fund size will determine the outcome. Given that these investments align with national industrial development priorities, the industry is paying close attention to this contest."

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