Ride hailing apps have generated huge interest among state-owned investors looking for market disruption and the next competitor to Uber.
South Korean public pension fund giant the National Pension Service (NPS) has backed domestic ride-hailing firm Kakao Mobility with a US$100 million investment, making up the bulk of a US$125 million funding round that was also backed by the TPG Group and the Carlyle Group.
Kakao Mobility has 28 million registered users of its app, making it the largest ride-hailing firm in South Korea.
The US$774 billion fund is bidding to raise allocations to alternatives from 10.9% at end-2020 to 15% by 2025 as it diversifies away from domestic public equities. It is aiming for private equity to represent around a third of its alternative investments. This has caused controversy as the strategic shift has involved rapidly exit domestic public equities in favor of foreign investment, impacting negatively on domestic retail investors.
Yet, the shift is crucial to boosting returns and addressing the long-term prospect of depletion of the world's third biggest pension fund. However, by backing Kakao Mobility, NPS is supporting a domestic private company that could, in the future, go public. As such, the ride-hailing firm represents a a third way between the choice of domestic public equity and foreign alternatives that could appease local concerns.
So far this year, NPS has invested US$2.8 billion in alternatives, mostly through externally managed funds. These include US$300 million in the tech-focused Apax X Fund, US$300 million in the KKR North America Fund XIII, and US$500 million to the Blackstone Life Science Office Real Estate Perpetual Fund.
In May, NPS teamed up with the Korea Investment Corporation (KIC) in their first ever co-investment, piling a total of US$600 milllion into a US$2 billion North America logistics real estate fund managed by GLP Capital Partners. The investors are looking to capitalize on the rapid growth in logistics in the wake of the pandemic, which stimulated the e-commerce market and raised demand for big-box storage and distribution warehouses.