Korea's POBA commits $120m to US mezzanine managers

Each manager will receive $40 million, according to a local media report linked in an announcement on POBA's website. The funds will invest in convertible and exchangeable bonds issued by small and mid-sized companies in North America.

These managers were selected after requests for proposals were sent to 10 mezzanine players following an initial screening process. POBA expects double-digit annual IRRs.

Local institutional investors are raising their allocations to alternative assets and the need for yield means private debt is being prioritized. "You cannot ignore the fact that we have our own benchmarks and target returns," Taehyeong Kim, a senior portfolio manager at Korea Teachers' Pension told the AVCJ Korea Forum in September. "Within a year we have to realize a certain level of returns and that means private debt, whether senior or mezzanine."

Korea Teachers' Pension has previously awarded a mandate to Crescent, as has the Government Employees Pension Service. The GP has more than $23 billion under management and invests in debt securities at all levels of a company's capital structure. It is currently deploying its sixth mezzanine fund, which closed at $3.4 billion.

Falcon has more than $2.9 billion in capital under management and invests in subordinated debt and equity capital in leading middle-market companies. It commits $25-75 million per transaction. GoldPoint - previously known as New York Life Capital Partners - focuses on equity co-investments, along with mezzanine and LP commitments. It has invested about $2.8 billion in more than 119 mezzanine transactions.

POBA said in March that it would double its allocation to offshore private equity funds in 2016 to $200 million. The pension fund resumed commitments to foreign PE firms last year, having suspended its program in the wake of the global financial crisis. In 2015, it allocated $30 million to a fund managed by The Blackstone Group, $40 million to Oaktree Capital Management, and $30 million to secondaries specialist Lexington Partners.

POBA expects its assets under management to reach KRW9.2 trillion ($8.2 billion) by the end of this year, up from KRW8.2 trillion at the end of 2015. The investment budget for 2016 stands at KRW1.5 trillion, of which KRW670 billion will be held in cash. A total of KRW485 billion has been earmarked for alternative investments.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• North Asia
• LPs
• Fundraising
• Financing
• South Korea
• Structured finance