Skip to content
  • KOSPI 2834.29 -28.39 -0.99%
  • KOSDAQ 942.85 -15.85 -1.65%
  • KOSPI200 376.08 -4.31 -1.13%
  • USD/KRW 1190.4 -1.40 -0.12%
  • JPY100/KRW 1,044.16 2.19 0.21%
  • EUR/KRW 1,346.76 -4.86 -0.36%
  • CNH/KRW 187.65 0.27 0.14%
View Market Snapshot
ASK 2021 CIO panel talks

POBA CIO says to expand SMAs, co-investment platforms

May 14, 2021 (Gmt+09:00)

POBA CIO (second from left), Teachers' Pension CIO (center), SEMA CIO (second from right), Hyundai Marine & Fire Insurance executive director (far right)
POBA CIO (second from left), Teachers' Pension CIO (center), SEMA CIO (second from right), Hyundai Marine & Fire Insurance executive director (far right)

South Korea's Public Officials Benefit Association (POBA) has earmarked over 1 trillion won ($900 million) for new real estate investments overseas this year, for which it will expand separately managed accounts (SMAs) and co-investment platforms because they ease the burden of due diligence, its senior officials said.

By asset type, the $15 billion retirement fund for South Korea’s provincial government employees is zooming in on residentials and logistics, as well as infrastructure properties in public-private partnerships (PPPs), its Chief Investment Officer Jang Dong-hun told a CIO panel session of the ASK Summit 2021 held in Seoul on May 12.

In the prolonged pandemic situation, the Teachers' Pension is shifting toward blind pool funds from project-based deals, after the $19 billion Korean pension scheme hardly made new overseas alternative investments last year because of due diligence difficulties, its CIO Lee Kyu-hong said during the panel talks. 

Hyundai Marine & Fire Insurance Co. is considering whether to broaden its portfolio into venture capital and startup funds because their recent stellar returns stimulated interest in the uncharted territory for the non-life insurer, said Jeon Kyung Chul, its executive director overseeing alternative investments. 

The following are key remarks from the chief investment officers of South Korea's four institutional investors during the CIO panel session of the ASK Conference 2021: (Their target returns are 4-5% per annum)

▶ Public Officials Benefit Association CIO Jang Dong-hun:

POBA Chief Investment Officer Jang Dong-hun
POBA Chief Investment Officer Jang Dong-hun

“Last year, we invested mainly through re-ups with the GPs where we have already invested. This year, we will concentrate on building SMA and co-investment platforms and expand them across all asset classes.”

“Quite a number of assets achieved huge returns in the COVID-19 situation. But we need to question whether those returns we had enjoyed over the past few years will be sustainable. POBA will continue to increase exposure to real estate and infrastructure, as well as private debts linked to interest rate markets.”

“We will invest more aggressively in debt tranches, rather than equity tranches, to protect downside risk."

“The assets that performed well in the pandemic situation will likely continue to do well. We are interested in residentials, logistics, PPP (public-private partnership)-style social infrastructure properties. For ESG-themed investments, we will take a look at them in a long-term perspective as part of risk management."

In a separate panel session, POBA's head of overseas real estate investment Harry Song said that it plans to pour over 1 trillion won into new real estate investments overseas this year. Currently, POBA's overseas property portfolio is valued at around 3 trillion won.

POBA had set up joint ventures with foreign pension schemes, including California State Teachers’ Retirement System (CalSTRS) and Denmark’s PFA to co-invest in overseas properties.

▶ Teachers’ Pension CIO Lee Kyu-hong:

Teachers' Pension Chief Investment Officer Lee Kyu-hong
Teachers' Pension Chief Investment Officer Lee Kyu-hong

“Last year, because of due diligence difficulties, we couldn’t make new overseas investments. We have to be more aggressive this year and make even more investments than last year.”

“It is still difficult to conduct due diligence because of the COVID-19. Thus, we now focus on global top-tier managers’ flagship funds. Before making a commitment to them, we may carry out contactless due diligence. Then we will conduct on-site due diligence once the pandemic situation improves."

“This year's biggest risk will be interest rate rises spurred by inflationary pressure. But given the still mild inflationary pressure in the US, I don’t expect major economies to shift monetary policies in the near term."

 Korea Scientists & Engineers Mutual-Aid Association (SEMA) CIO Huh Sung-moo:
SEMA Chief Investment Officer Huh Sung-moo
SEMA Chief Investment Officer Huh Sung-moo

“We will increase the portion of multi assets to 10% over the next few years from the current 7% and last year’s 5%. Climate change, demographic change and technological innovations are the three key trend changes. In particular, since the COVID-19 began, reduced resistance to technological change will accelerate the pace of social change. Weaker productivity due to the aging population can be solved by technology. I am concerned about the current market liquidity and inflation risk, which I don't think will last long, though."

“Because of the aging population and technological innovations, interest rates have remained low. The role of bonds in balanced portfolios seems to be weakening.”

“The US-China conflicts will likely escalate further. Thus, we have more uncertainties about where risk will arise. Portfolio diversification will be the best way to reduce volatility. Climate change and technological innovations will create new industries and we will concentrate on seizing opportunities from them to create alpha.”

Hyundai Marine & Fire Insurance, Executive director, Jeon Kyung Chul:

yundai Marine & Fire Insurance, Executive director, Jeon Kyung Chul
yundai Marine & Fire Insurance, Executive director, Jeon Kyung Chul

“Because risk-based capital requirements apply to the committed capital as well as to the invested capital, our priority is now on how quickly to deploy money and how much we can reduce the commitment period. Thus, we have focused on secondary strategies to accelerate our capital deployment."

"In buyout funds, to lower RBC charges, we joined at the final closing because of the time gap between the first closing and the final closing which is several months to one year."

“Insurance companies are leaning toward unleveraged strategies because of high RBC charges."

“What is concerning is how effectively we can incorporate the ESG theme into our investments. Further, because of the RBC requirements, we had not looked at venture capital and equity funds targeting minority companies given their long investment period. But they not only made explosive growth but also generated handsome returns in the past few years. So I am thinking about whether and how to build exposure to them.”

“We also saw the rise of new asset classes such as data centers. They are now treated as special assets, but they may eventually become traditional infrastructure assets like ports and power plants. Cryptocurrencies are totally uncharted territory for us, so I am thinking whether we need to include them in our portfolio.”

Yeonhee Kim edited this article.

Comment 0