Korea’s POBA mulls open-ended funds to ‘secure liquidity’

Korean pension Public Officials Benefit Association is considering investing in open-ended private equity and infrastructure funds, chief investment officer Jang Dong-hun told sister publication Private Equity International.

The $9 billion pension is attracted to these vehicles because it believes they offer more liquidity, Jang said. “These days we would like to invest in funds that provide quarterly or semi-annual redemption features for LPs, so that we can secure liquidity in the event of an emergency.”

Some GPs are planning ahead and incorporating secondaries tools into their latest funds in expectation of liquidity requests from LPs. Macquarie Infrastructure and Real Assets’s latest long-life infrastructure vehicle, Super Core Infrastructure Fund, includes a facility for secondaries sales in the documentation for the 20-year fund.

POBA has a 12.6 percent exposure to private equity that also includes credit and mezzanine strategies. The pension has primarily backed blind-pool private equity funds managed by Ares Management, Macquarie Group and Korean managers IMM Private Equity and STIC Investments, according to PEI data.

Along with plans to invest in open-ended funds, Jang said POBA will also increase its exposure to separately managed accounts, co-investments as well as strategic joint investments with global pensions in the near-term.

POBA teamed up in April with an undisclosed Californian public pension for a $400 million joint venture into US senior real estate debt. Jang noted that POBA “would like to pursue more JVs with global pensions the future”.

The pension will also continue ramping up investments in overseas private equity, especially in North America and Europe. In the last three years POBA has nearly doubled its exposure to overseas private equity, from between 10 and 20 percent in 2015 to 37 percent as of end-June, Jang said.

“In 2015 we didn’t have that many Korean blind-pool funds to invest in,” Jang explained. “From a risk-return perspective, we felt more opportunity and more cash-rich investments in offshore than domestic private equity.”

He added that he expects this ratio “to continue to go up”, as the pension has no specific cap for the strategy.