Healthcare, tech top Korean LPs' favorite PE sectors

Healthcare and technology are the preferred sectors for global private equity investment, a survey of South Korea's major asset owners has shown. Co-investment and secondary topped the private equity investment strategies.

The Korea Economic Daily recently conducted a survey of 26 limited partners in Korea on their alternative investment and manager selections. The LPs manage a combined 381.1 trillion won ($312.7 billion) in their alternative assets, which account for an average of 28.4% of their total AUM. Some 23 out of the LPs currently manage 48.4 trillion won ($39.7 billion) in overseas private equity.

To view responses of individual institutions on their alternative asset allocation and fund manager selection, please visit Asset Owners Report. 

In the survey, 61.5% of the LPs said they will bulk up their overseas private equity investment. Some 23.1% said they will hold the current proportion. None polled expressed an intention to cut exposure to the asset class.



Healthcare and tech topped the preferred sectors for private equity investment, chosen by more than 42.3% of the respondents. Some 30.7% said they will decrease exposure to consumer & retail. Also, some 69.2% and 53.8% said they will maintain their current exposure to business and financial services, respectively. 



The favored private equity strategy was co-investment, scoring 53.8%. Secondary and management buyouts ranked second and third with 50% and 38.5%, respectively. In a similar poll conducted last year, secondary and co-investment came first and second, respectively.

Also, 65.4% said they will hold the current exposure to primary fund of funds (FoFs). Some 19.2% said they will reduce their distressed, special situation and opportunistic strategies, a shift understood as a way to maximize stable cash flow.



Most LPs preferred blind pools and co-investments for private equity investing. Given the multiple-choice option, 96% and 54% of the LPs picked blind pools and co-investments, respectively. Separate accounts ranked third, scoring 14%. None of the LPs chose other investment channels such as joint ventures, listed private equity and private investment in public equity (PIPE).

By region, 53.8% will increase private equity investing in North America. Some 42.3% plan to bulk up private equity exposure to Europe, and only 15.4% will expand exposure to Asia. In last year's survey, Asia was picked as the top destination for private equity investment, scoring 23.5%.

The LPs will be proactive in private equity investing this year with 38.5% of the LPs planning to invest in more than four private equity funds over the next 12 months. 

To view responses of individual institutions on their alternative asset allocation and fund manager selection, please visit Asset Owners Report.

Participants in this survey are as follows:

Public pensions and SWF

National Pension Service
Korea Investment Corporation
Korea Post - savings bureau
Korea Post - insurance bureau
Government Employees Pension Service
Teachers' Pension

Mutual Aids & Associations

Korean Federation of Community Credit
Korea Teachers' Credit Union
Public Officials Benefit Association
Yellow Umbrella Mutual Aid Fund
Korea Scientists & Engineers Mutual Aid
Military Mutual Aid Association

Insurance

Hanwha Life Insurance
Kyobo Life Insurance
Shinhan Life Insurance
Samsung Fire & Marine Insurance
NongHyup Life Insurance
DB Insurance
Hyundai Marine & Fire Insurance
KB Insurance
Mirae Asset Life Insurance
Meritz Fire & Marine Insurance
ABL Life Insurance
Prudential Life Insurance
Lotte Insurance
NongHyup Property & Casualty Insurance

Write to Chang Jae Yoo at yoocool@hankyung.com
Jihyun Kim edited this article.