73% of LPs to ramp up global warehouse investment

Key asset owners of South Korea are eyeing logistics centers and multifamily housing for real estate investing while planning to reduce exposure to hotels and retail, a survey of major limited partners found. The LPs picked core plus as the preferred strategy, the survey showed.

The Korea Economic Daily conducted a survey of 26 limited partners in Korea on their alternative investment and manager selections. The LPs manage a combined 381.1 trillion won ($305.2 billion) in alternative assets, which account for an average of 28.4% of their total AUM. Some 23 out of the LPs currently manage 66.1 trillion won ($52.9 billion) in overseas private real estate.

To view responses of individual institutions on their alternative asset allocation and fund manager selection, please visit Asset Owners Report. 

Real estate is the least-favored asset class for alternative investment, according to the survey. Only 46.2% will increase exposure to global real estate, while 61.5%, 69.2% and 76.9% will ramp up exposure to global private equity, debt and infrastructure, respectively.



The LPs' preferred sectors underscored the impact of COVID-19 on each property type. Some 73.1% and 61.5% will bulk up exposure to logistics centers and multifamily housing, respectively. Meanwhile, 69.2% and 65.4% will reduce exposure to the retail and hotel sectors, respectively. None of the respondents will increase investment in these two sectors, the survey found.



For overseas real estate investment strategy, core plus topped the list with 57.7%, followed by value-add with 38.5%. Some 61.5% said they will maintain their current core strategy exposure. Development, secondary and opportunistic & distressed were the least-favored strategies.



By tranche, senior secured loans ranked top -- 30.8% will expand exposure and 53.8% will hold their current exposure to such debt. Subordinated loans were the least preferred, scoring just 11.5%. Some 50% will hold their current exposure to subordinated debt and 26.9% will reduce it.

In the multiple-choice section, closed-end funds were the most-selected real estate investment method, selected by 50% of those polled. Direct investment, joint ventures and open-end funds jointly ranked second, each with 11.5%.

By region, 46.2% of the respondents will expand real estate investment in North America and Europe. Only 19.2% will increase exposure to Asia, while 30.8% plan to cut real estate investment to the region.

Asked how many global real estate funds they will choose this year, 38.5% of the LPs will make new commitments to four or more funds. Another 19.2% and 11.5% will invest in three and two real estate funds, respectively.

To view responses of individual institutions on their alternative asset allocation and fund manager selection, please visit Asset Owners Report.

Participants in this survey are as follows:

Public pensions and SWF

National Pension Service
Korea Investment Corporation
Korea Post - savings bureau
Korea Post - insurance bureau
Government Employees Pension Service
Teachers' Pension

Mutual aids & associations

Korean Federation of Community Credit
Korea Teachers' Credit Union
Public Officials Benefit Association
Yellow Umbrella Mutual Aid Fund
Korea Scientists & Engineers Mutual Aid
Military Mutual Aid Association

Insurance

Hanwha Life Insurance
Kyobo Life Insurance
Shinhan Life Insurance
Samsung Fire & Marine Insurance
NongHyup Life Insurance
DB Insurance
Hyundai Marine & Fire Insurance
KB Insurance
Mirae Asset Life Insurance
Meritz Fire & Marine Insurance
ABL Life Insurance
Prudential Life Insurance
Lotte Insurance
NongHyup Property & Casualty Insurance

Write to Chang Jae Yoo at yoocool@hankyung.com
Jihyun Kim edited this article.