GEPS to invest $20 mn in dollar-denominated structured notes

  • 2017-06-26

The Government Employees Pension Service (GEPS) will allocate $20 million to US dollar-denominated structured notes based on South Korean credit default swaps (CDS) and three-month US dollar LIBOR.

It received proposals for the investment mandate by the afternoon of June 26.

The structured notes, which GEPS will invest in, should pay interest rates when both of South Korea’s CDS rate and three-month US dollar LIBOR are less than 6%, according to the South Korean pension fund.

The issuer(s) of the notes must be rated by at least two of three global rating agencies: A minus or above by S&P and Fitch, and A3 or above by Moody’s.

The notes will have a one-year non-call period with a maturity of 10 or 15 years.

Qualified management firms must have a minimum capital of 10 billion won ($8.8 million) and track records of foreign currency-denominated structured notes with a cumulative value of at least 100 billion won in the past five years.

GEPS will pay five basis points of the notes’ value as management fees.

The pension scheme has been investing in foreign currency-denominated structured notes via management firms in search of medium-risk, medium-return assets. Last year it awarded a $20 million mandate for US dollar-denominated structured notes to an unidentified investment firm.

It had 6.5 trillion won ($5.7 billion) in financial assets at end-2016.

By Ikhwan Kim

<Edited by Yeonhee Kim>