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Private debt

Yellow Umbrella Mutual commits $540 mn to overseas debt funds

Dec 07, 2019 (Gmt+09:00)



Yellow Umbrella Mutual Aid Fund, a savings arm for South Korea’s small-sized business owners, has committed $540 million to overseas debt funds in the second half of this year which lend to speculative-grade companies and value-add US properties.

The $540 million commitment broke down into $300 million for private debt funds; $200 million for US real estate blind-pool funds; and $40 million for an infrastructure debt fund, according to a source of the mutual aid fund on Dec.4.

It was the first major investment led by Du Yeong Jeong, a former chief investment officer of the Korea Scientists and Engineers Mutual-aid Association (SEMA), who took office as CIO in May.

For private debt investment, it committed $300 million to six global investment houses, including CVC Partners, GSO Capital Partners of Blackstone and London-based Permira.

They lend to BB-rated small and medium-sized companies in the US and Europe. To lower investment risk, the debt fund managers will be directly involved with managing and restructuring the companies, unlike conventional corporate debt funds.

The additional $200 million was put into four US real estate blind-pool funds managed by Ares Management, BlackRock, Blackstone and Mack Real Estate Group.

They provide senior loans, or whole loans on core plus, or value-add assets in the US real estate market. Senior loans generate 4-5% yields per annum, with whole loans offering 6-7% yields per year.

Details for the $40 million commitment to an infrastructure debt fund were not immediately available.

“Given the increased internal and external uncertainties, money is being plowed into moderate income-producing assets with minimum risk,” said the source.

“Investors are flocking to blind funds because of a lack of attractive projects and declining expected margins in the real estate and infrastructure sectors.”

The allocations were focused on debt and developed markets, safer areas than equity and the domestic market, he added.

Alternatives make up about 10% of the mutual fund’s 10.6 trillion won ($9 billion) AUM, far lower than other institutional investors in South Korea. It belongs to the Korea Federation of SMEs.

CIO Jeong had led investment of SEMA between May 2015 and April 2019. During his stint, the $4 billion fund made its first allocation to global private debt funds in 2017.

Write to Jung-hwan Hwang at jung@hankyung.com



(Photo: Getty Images Bank)

Yeonhee Kim edited this article

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