[ASK 2017 SUMMIT] Korean LPs call for co-investment offers from GPs

When Korea Post issued a request for proposals on May 17 for global private debt investment of up to $300 million, the state agency added a new requirement: coming up with a co-investment proposal.

“General managers must provide us with a co-investment opportunity for blue-chip assets to strengthen GP-LP networks and boost returns,” the postal agency said in the RFP.

The new requirement highlights the recent trend among South Korean asset owners which are raising their appetite for co-investments with general partners across alternative asset classes.

Such demands were echoed by major South Korean limited partners in the ASK 2017 Private Debt & Equity Summit hosted by the Korea Economic Daily in Seoul on May 17.

“We put focus on manager selection and whether they can provide co-investment opportunities,” said Ki Pum Kim, a team manager of the Military Mutual Aid Association, in a panel discussion of the conference.

“This year we will concentrate on co-investment,” said Kyung Cheol Jeon, a general manager of Hyundai Marine & Fire Insurance Co. Ltd., in the panel discussion, when he talked about private debt investment plans.

National Pension Service (NPS) and Korea Teachers’ Pension also have been expanding co-investments in overseas alternatives.

Hyung Don Choe, NPS' head of Global Private Equity, said in another panel discussion of the summit: “We are looking closely for mezzanine credit funds and co-investments.”

NPS recently agreed to deploy $100 million for co-investment with Rockpoint Group, on top of its capital commitment of $200 million to a real estate fund of the Boston-based investment firm.

Co-investments with GPs are likely to give asset owners more control over the invested asset and generate higher yields, as well as saving fees.

LPs are also able to participate in pre-placement, or sub-underwriting before a deal signing, but they are required to execute them speedily.

“LPs will increasingly prefer GPs who can provide co-investment opportunities,” Jung Yong Yang, head of Meritz Fire & Marine Insurance’s asset management department, in a separate session of the conference.