Korea's POBA to double offshore PE allocation

The pension fund is likely to select 4-5 GPs and commit $40-50 million to each one, said CIO Dong-Hun Jang, Mergermarket reported. He is especially interested in Europe, noting that subsequent to increases in capital requirements for financial institutions, some financial institutions could divest healthy assets. POBA has already made contact with a few European GPs. China, meanwhile, is seen as less attractive due to regulatory uncertainty.

POBA 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 Lexington Partners. The latter closed its eighth global secondaries fund last year at the hard cap of $10.1 billion.

Preferred candidates for the next round of investments will have more than $5 billion in assets under management. Venture capital will not be considered because it doesn't meet the pension fund's risk-return requirements.

POBA is also considering investing KRW70 billion ($58 million) in offshore infrastructure, and could spend more than KRW100 billion, depending on whether certain existing assets are exited this year. The pension fund focuses on developed markets and is particularly interested in Australia.

"We are newly expanding into overseas farmlands or timberlands as traditional targets such as social overhead capital [which typically refers to basic services across transportation, communication and power] appear less profitable," Jang explained.

POBA expects its assets under management to reach KRW9.2 trillion 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.

While the likes of Korea Investment Corporation and the National Pension Service are established participants in offshore private equity, various mid-sized local pension funds are in the process of boosting their exposure to the asset class. Last month, Korea Scientists & Engineers Mutual-aid Association said it planned to invest half of its KRW300 billion overseas allocation for 2016 in private equity.

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• Topics
• North Asia
• LPs
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• South Korea