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Korean Investors' Survey

Transparency, GP commitment key in Korea LPs' manager selection

Oct 28, 2020 (Gmt+09:00)

South Korea’s leading institutional investors, including the National Pension Service (NPS), rated general partners’ (GP) commitment and fund transparency as the most important selection factors following track record, when choosing asset managers for alternative investment, a survey by The Korea Economic Daily shows.

Among the 14 criteria for GP selection, GPs' commitment and fund transparency ranked a joint second with 82.4% of respondents rating these factors as important or very important.

A GP’s track record, including the manager’s experience, execution capabilities and past performance, came in first with 88.2% of those polled considering this factor as important or very important.

Between transparency and GP commitment, the respondents put more focus on transparency as 47.1% rated it very important. In comparison, 11.8% of the Korean limited partners (LPs) saw GP commitment as very important, with another 70.6% considering it important.

This survey was conducted ahead of the global alternative investment conference ASK 2020 hosted by The Korea Economic Daily in Seoul on Oct. 28. It polled 17 institutional investors, including NPS, Government Employees Pension Service, Korean Teachers’ Credit Union and Korea Investment Corp., as well as insurance companies.

The poll also shows Korean LPs preferring blind pool funds for alternative investment, with 52.9% of the respondents opting for blind pool funds versus project-based deals. In comparison, 11.8% of the LPs expressed their preference of project-based investment over blind pool funds.


PERFORMANCE DURING CRISES

Risk management, or performance during market downturns, also ranked high among the factors that Korean LPs consider: 52.9% of the respondents considered it very important and another 17.6% rated it important. It received the second-highest percentage as a very important factor, just behind track record.

The criteria list for GP selection include assets under management (AUM), size of the fund being raised, co-investment opportunity, knowledge transfer, deal pipeline and speed of capital deployment. Among them, AUM and deal pipeline were higher on the list.

LOCAL FUND OF FUNDS MANAGER

As for the importance of the presence of Seoul-based fund of funds managers, 47.1% of the respondents considered it important or very important. Korean LPs value both product understanding and communication the most from local FoF managers. Each of the two items received 41.2% in the multiple-choice survey. 

When asked about the importance of an asset management firm having an in-house Korean investor relations officials and their service quality, only 23.5% considered both factors very important.

For placement agents, product understanding is the most-required capability picked by 35.3%, followed by communication.


MAIDEN FUND

A notable factor in the survey is that a larger number of Korean LPs expressed their willingness to invest in first-time funds.

Asked about their intent to invest in maiden funds, 58.8% of those polled gave a positive answer. It may suggest a change in their attitude to take more risk in search of yields, as well as improved understanding of financial products.

Further, 88.2% of the respondents said they could invest in an emerging market fund. Slightly more than half of those polled feel the need to hedge against currency fluctuations.

Participants in this survey are as follows:

1. National Pension Service 
2. Korea Investment Corporation 
3. Teachers' Pension
4. Government Employees Pension Service
5. Korea Teachers' Credit Union
6. Public Officials Benefit Association
7. Military Mutual Aid Association
8. Police Mutual Aid Association
9. Yellow Umbrella Mutual Aid Fund
10. Construction Workers Mutual Aid Association
11. Hanwha Life Insurance
12. Kyobo Life
13. Samsung Fire & Marine Insurance
14. Prudential Life Insurance
15. Hana Life Insurance
16. Lotte Insurance
17. ABL Life Insurance

To see individual investors' responses to this survey, go to the Asset Owner Report under the Korean Investors tab on our homepage.

Write to Chang Jae Yoo, Seon-Pyo Hong and Sang-eun Lucia Lee at yoocool@hankyung.com

Yeonhee Kim edited this article.

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