NongHyup Financial raising $264 mn infrastructure blind fund: report

NongHyup Financial Group Inc., a holding company of South Korea’s national agricultural cooperative, is raising a 300 billion won ($264 million) blind-pool fund to invest in infrastructure mostly overseas, according to a local media report.

NH Investment & Securities Co. Ltd., NongHyup Life Insurance Co. Ltd. and other units of the holding company will participate in the new fund to be managed by NH-Amundi Asset Management Co. Ltd., a joint venture between NongHyup Financial and France’s Amundi.

The fund size could increase to 800 billion won by year’s end, the Invest Chosun of the Chosun Ilbo newspaper reported on May 4.

Meanwhile, NongHyup Financial Chief Executive Yong-hwan Kim told the Dong-A Ilbo newspaper in an interview late in April that the infrastructure fund would increase to 1 trillion won on expectations that US President Donald Trump would unveil a huge infrastructure plan.

The fund will chase infrastructure assets in OECD member countries which appear to have low policy risk, for an investment period of around 15 years.

It targets around 10% return from equity investments and about 7% from subordinated debt purchases.

NongHyup Financial, under the National Agriculture Cooperative Federation, has been pushing into overseas infrastructure and property assets, including $200 million investment in Cricket Valley Energy Center in New York.

The fundraising comes as South Korean insurance firms are expected to boost investment in overseas infrastructure in search of long-duration assets, ahead of the introduction of new accounting standards in 2021 which mark to market liabilities.

South Korean financial regulators are also loosening regulations on insurers’ cross-border investments by cutting reserve requirements by half for insurers’ overseas infrastructure assets from as early as June.

But with pension and savings funds’ offshore infrastructure investments concentrated in developed countries, some institutional investors voice concerns about intense competition among South Korean institutional investors in overseas markets.

“Given the default risk in countries with low credit ratings, it is difficult to invest in the Third World countries. But competition between domestic institutions may end up driving the price of the same product higher because we have similar valuation standards,” Invest Chosun quoted an unnamed investment banking source as saying.