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POBA invites bids for $400 mn multi-asset mandates

The retirement fund will pick two consortiums each composed of global and domestic asset managers

Aug 24, 2021 (Gmt+09:00)

(Source: Getty Images Bank)
(Source: Getty Images Bank)

South Korea's Public Officials Benefit Association (POBA) will commit $400 million to two multi-asset funds this year, in its first investment in the multi-asset class.

POBA is targeting an annual return of more than 4.5% in terms of the US dollars from the multi-asset investments, according to its request for proposals released last week.

Qualified candidates must form a consortium with a domestic asset manager which will be in charge of setting up the investment vehicle and the post-investment management.

It will receive proposals by Sept. 16 at 3 pm (Korea standard time) and finalize the selection by mid-November.

POBA said its first allocation to multi-asset funds is aimed at diversifying its portfolio to earn stable returns, while learning the asset allocation strategy and tactics of global investment companies and their risk management systems.

The multi-asset funds will be required to invest in equities, fixed income and alternative assets, with alternatives taking up a minimum 20% share and up to 60%. Alternative assets include both public and private assets such as private equity, private debt and real estate investment trusts, as well as infrastructure. But hedge funds should be excluded from the portfolio.

The qualified overseas asset managers must have experience of at least three years of managing multi-asset funds, with at least $500 million worth of relevant assets as of the end of July this year.

FIRST-HALF RETURN

POBA manages retirement savings for South Korean provincial government employees. In the first half of this year, its assets under management swelled by 1.5 trillion won to 17.9 trillion won ($15.3 billion), driven by hefty gains from alternative investments.

The first-half asset growth surpassed its full-year target of a 1.2 trillion won increase.

In June, it earned 40 billion won from the exit of HYBE Co., the label behind the K-pop sensation BTS, POBA Chief Investment Officer Jang Dong-hun said in an interview with the Maeil Business Newspaper last week. It had invested in HYBE through Seoul-based STIC Investments.

Additionally, POBA pocketed 30 billion won from the divestment of JobKorea through Korea-based private equity fund H&Q. In March, H&Q sold 100% of the country’s top recruitment portal to Affinity Equity Partners for 900 billion won.

It also netted 60 billion won from the sale of an equity interest in H Square, a landmark office building in Pangyo Techno Valley leased to Kakao Corp.

Jang attributed the decent first-half investment return to its diversified portfolio.

“In the past, POBA were extremely reluctant to invest in high-risk assets,” Jang was quoted as saying. “In the first half of this year, we diversified into various areas, not only into public markets but also into private markets and real estate development projects.”

He added that infrastructure, real estate and private equity funds will undergo digital transformation at a rapid pace, and POBA will try to keep pace with the digitalization trend.

By Yeonhee Kim

yhkim@hankyung.com

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