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Korean insurers, Shinhan Alternative commit $130 mn in KKR CMBS fund

Oct 23, 2020 (Gmt+09:00)

South Korea's insurers along with Shinhan Alternative Investment Management Inc. have committed $130 million in the real estate stabilized credit (RESTAC) fund newly set up by global private equity firm KKR, according to the asset management industry on Oct. 22.

KKR’s fund will invest in commercial mortgage-backed securities (CMBS) which securitizes large senior loans collateralized by A-grade property in metropolitan areas of the US. Local insurers were able to invest in the CMBS fund as limited partners thanks to the fund's investment-grade rating. 

In general, an average CMBS fund will use a pool of dozens, or thousands of commercial properties as collateral. However, the fund that Shinhan Alternative is investing in will be set up with a single asset, single borrower (SASB) loan backed by a single commercial property.

Due to COVID-19, many asset management companies have not been able to conduct on-site due diligence which has made them wary of investing in a single pool of multiple assets. Also, many commercial assets such as shopping malls and hotels have been heavily affected by the coronavirus crisis, which raises greater concerns over the possible loss.

Meanwhile, the SASB product invests in only a single, large commercial property which lessens pressure on the due diligence process. Also, Shinhan Alternative determined that it would benefit from the investment once the coronavirus crisis settles down. The expected yearly returns are around 7% based on the US dollar.

“The loss rate for a single asset, single borrower loan is much lower than CMBS because it is backed by a very large asset that goes through an intensively thorough assessment,” said a source from Shinhan Alternative.

“Also, borrowers of the underlying asset are usually global asset management firms such as Blackstone or Brookfield, which lowers credit risk against borrowers,” the source explained.

Shinhan Alternative and KKR have been collaborating for several months to secure handsome investment opportunities. 

“We will carry out aggressive investment opportunities up to early next year targeting domestic institutional investors who are resuming overseas investments,” said Kim Hee-song, the chief executive officer at Shinhan Alternative.

Write to Sang-eun Lucia Lee at

Danbee Lee edited this article.

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