Korea Investment to commit $18 mn from short-term debt to Blackstone

Korea Investment & Securities Co. Ltd., one of aggressive cross-border institutional investors in South Korea, will commit 20 billion won ($18 million) to Blackstone Group’s latest global real estate fund in its first investment of short-term money raised via a promissory note in a blind-pool fund.

Blackstone is on track to raise above-target 20 trillion won in Blackstone Real Estate Partners IX, a medium-risk medium-return fund for a target IRR of over 14% per annum, according to investment banking sources on Dec. 18. It will employ value-add strategy for an investment period of five to six years and have a maturity of about 10 years.

Korea Investment’s commitment to the global fund is seen as part of effort to bolster investment returns on nearly 4 trillion won it has raised via promissory notes in aggregate so far this year.

The 25-basis-point rate hike by the Bank of Korea on Nov. 30 underlined the need of diversifying its portfolio into better-yielding assets. The brokerage house lifted coupon rates on short-term notes by 20 to 25 basis points following the base rate increase.

In November 2017, Korea Investment became South Korea’s first non-banking financial institution allowed to issue promissory notes for corporate financing, which have maturities of less than one year.

To qualify as a short-term debt issuer in line with the government’s policy effort to nurture and support big investment banks, it boosted equity capital to over 4 trillion won last year.

In 2019, Korea Investment plans to raise a total of 6 trillion won via promissory notes, buoyed by the recent increase in the issuance limit and loosened regulations over their investment targets.

Further, to meet investment demand for dollars held by individuals and exporters, Korea Investment sold a dollar-denominated promissory note with a coupon rate of 3.5% on Dec. 17.

With short-term debt instruments siphoning off market liquidity from low-yielding bank accounts, NH Investment & Securities Co. Ltd. reportedly has raised 1.6 trillion won via promissory notes in less than a half year since it was allowed to issue the note in July of this year.

By Gowoon Yi

ccat@hankyung.com

Photo: Getty Images Bank