Korea's POBA in screening overseas PEF managers to commit $300 mn

The Public Officials Benefit Association (POBA) is screening investment proposals from overseas private equity fund managers to entrust a combined $300 million to about six of them this year, an increase from last year’s commitment of $200 million to five foreign PEF managers.

With the increased commitment amount, the savings fund for South Korean government employees will further diversify PEF portfolios into equity investments for buyout and growth capital; loan investments for mezzanine and bad loans; and secondary investment, funds of funds and co-investments.

In April, POBA will conduct due diligence on the investment firms scoring high on its assessment. It plans to allocate $50 million each to those receiving its PEF mandates, according to a POBA source.

It is unknown yet how many companies or which investment firms have submitted proposals to the South Korean fund.

Qualified management houses must have a fund liquidation experience and raise more than 60% of their target size of a fund within one year after winning a mandate from POBA.

“Because of worries about delay in investment and redemption, most of institutional investors give high scores to the firms which can close a fund soon, rather than to the firms trying to increase fund size beyond their capability,” said an unnamed investment banking source.

Since beginning to entrust capital to overseas PEFs in 2015, POBA has been scaling up its exposure to them, together with other alternative investments.

Last year POBA entrusted a combined $200 million to HabourVest (secondary investments), Pantheon, LGT (fund of funds), Hastings (mezzanine) and Partners Group (buyout).  In 2015, it allocated $100 million on aggregate to Lexington Partners, Blackstone and Oaktree Capital for PEF investments.

Earlier this month POBA selected five overseas private debt fund managers to allocate a total of $120 million.

By Donghun Lee and Sanghun Oh

leedh@hankyung.com