The Public Officials Benefit Association (POBA) will launch a joint fund worth about 900 billion won ($753 million) with a Danish pension fund to invest in Europe’s real estate market, as it is stepping up direct investments in alternative assets.
POBA will sign a memorandum of understanding with the unidentified pension scheme in Denmark on Oct. 4 to make joint property investments in Europe, the South Korean retirement fund said on Sept. 19.
“By cooperating with local pension funds which have a good understanding of the local property market’s situations, we can reduce the risk of loss and invest in high-yielding, decent assets,” CEO of POBA Gyeong-Ho Han told reporters in a news conference on the occasion of his first-year anniversary as CEO.
“Additionally, we are seeking cooperation with European institutions, including German insurer Allianz,” he said, without elaborating further.
For real estate and infrastructure investments, the $11 billion retirement fund has been shifting towards direct investment away from indirect investment made through domestic brokerage companies to shore up returns.
It will raise the proportion of alternative investments from the current 54% of total assets under management by allocating new contributions from subscribers to alternatives, a POBA source said during the conference.
To fixed-income investments which are projected to reach 12.8% by year-end, it will raise exposure with focus on developed markets, while maintaining the proportion of equities at the current level of 14%.
Last year, POBA launched a $400 million joint fund with the California State Teachers’ Retirement System (CalSTRS) and formed a similar joint fund with Teacher Retirement System of Texas (TRS) to invest in US real estate debts.
In aggregate, it has launched joint funds worth 880 billion won to invest in the US real estate market.
Its 2018 investment return came to 4.7% on average, compared with a negative 0.92% of the National Pension Service.
This year, it is targeting an annualized 4.5% return on average.
By Hyun-il Lee
<edited by Yeonhee Kim>