Hyundai Marine sees huge potential in global data centers

Hyundai Marine & Fire Insurance Co. of South Korea is seeking investment opportunities for distressed and special situation strategies with a selective approach, said Jeon Kyung-cheol, head of the insurer's alternative investment division during an LP panel session at ASK 2022 last Wednesday. ASK is The Korea Economic Daily's biannual forum on global alternative investment.

The insurance company is also eyeing overseas data centers as values in these assets have the potential to grow in line with those of traditional infrastructures, such as toll roads, ports and power plants.

The insurer will continue to look for senior debt investments with higher profitability amid rate hikes, as well as secondaries with more discount rates.

It also expects senior loans for local premium office investments and acquisition financing to be more popular this year with stabilized interest rates, he added.

The insurance company is managing 43.2 trillion won ($34.2 billion) in assets, including 11 trillion won for alternative investments. Overseas private equity and debt respectively make up 9.1% of the alternative assets, while global real estate and infrastructure account for 15.9% and 11.4%, respectively. 

The insurer invests in more project-based funds than blind pools for global real estate, while betting on more blind pool funds than project-based funds for PE and PD. The ticket size per fund ranges from $30 million to $50 million.     

Hyundai Marine is taking a conservative stance on investment, focusing on senior debt and reducing ticket sizes for some funds. This year, amid rate hikes and the Russia-Ukraine war, is shaping up to be the toughest year since the global financial crisis, and insurance companies are undergoing more difficulties in investment decision-making due to risk-based capital (RBC) management, Jeon said.

Korean insurance companies are set to introduce two versions of International Financial Reporting Standards, IFRS 17 and 9, effective in January 2023. IFRS 17 requires measuring both assets and liabilities at market price, instead of book value, which will lead to an increased value of liabilities. Under IFRS 9, changes in asset values, as well as equity dividends and gain on sale of assets, are considered as the investor’s net gain or loss. This will worsen the volatility of returns, Jeon said.  

To reduce the impact of the two standards, Hyundai Marine will keep investing in unlevered private debt funds and secondaries. Also, it is planning to look for growth equity investments with quick net asset value increases.

For environmental, social and governance (ESG) investing, Hyundai Marine is gradually increasing exposure to renewables and reducing coal power investment. Given the tough conditions for RBC management, it doesn't yet have an ESG standard for selecting general partners but is considering setting relevant criteria in the future. Prioritizing environmental factors, the company is the first Korean insurer to have published annual sustainable investment reports and is accelerating sales of ESG-related financial products, he added.

Write to Si-Eun Park at seeker@hankyung.com
Jihyun Kim edited this article.