POBA targets upper-middle market in North America for PD investment

Public Officials Benefit Association (POBA) of South Korea will keep its conservative stance in both private equity and private debt investment, while strengthening standards for selecting general partners in terms of track records and risk management, Huh Jang, chief investment officer at POBA said in an LP panel session at ASK 2022 last Wednesday. ASK is The Korea Economic Daily's biannual forum on global alternative investment.

The pension fund for Korea’s provincial government employees is managing 19 trillion won ($15 billion) in assets where the alternative investment accounts for 73%. Overseas private debt and private equity make up 34% of the alternative assets, while global real estate and infrastructure respectively account for 16% and 11%. The ticket size per fund ranges from 50 billion to 200 billion won.

Due to growing concerns over global inflation and recession risks, POBA has focused on securing liquidity while pending new investments except for capital calls for the previous commitments since early this year. The pension fund also invested in assets for steady income gains such as equity dividends, interest income and rental income, the CIO said.  

POBA will maintain conservative strategies for overseas PD investment. It will strengthen portfolio diversification and standards for hiring GPs, especially on their vintage risk management, while excluding covenant-lite loans that have fewer protections for lenders.

The fund will prioritize PD investments in the upper-middle market in North America and also look for price dislocation, special situations and distressed debt strategies for mezzanine debts given that the market could become more volatile.   

For PE investment, the fund will intensify monitoring activities for the investment and commitment it has made. It is also looking for secondary funds and project-based co-investment opportunities while considering betting on tech, healthcare and bio sectors and some overseas ventures for portfolio diversification.   

POBA is looking for GPs that have seasoned experiences in market cycles and can promptly communicate on market trends and asset value updates, the CIO said. It will focus on the track record of each vintage on the credit cycle when selecting GPs, he added.

The pension fund has not reflected environmental, social and governance (ESG) factors for investment standards and is planning to set ESG-related principles for selecting portfolio companies and GPs. It is eyeing some ESG funds for PE portfolio diversification, the CIO said.

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