The Public Officials Benefit Association (POBA) of South Korea has decided to commit 60 million Australian dollars to a Macquarie infrastructure fund that will invest in Australian state assets, and the association is also considering putting a similar amount into an infrastructure fund in the United States and Europe, respectively, later this year, investment banking sources said on July 28.
POBA’s investment review committee approved on July 27 of the commitment to the Macquarie infrastructure fund that is projected to raise up to 1.5 billion Australian dollars to acquire core infrastructure assets from the Australian government in private deals, according to the sources.
The savings fund for local public officials is expecting a more than 8% annual return on the investment in the new Macquarie fund that is also drawing interest from a few other South Korean institutional investors (limited partners).
“We are considering a commitment to an infrastructure fund investing in the U.S. and Europe, respectively, in the second half of this year,” a POBA source told the Korea Economic Daily. “We have recently finished due diligence (in relation to the commitment plans).” He added that a commitment to the other infrastructure funds would be about 50 billion won ($44 million) each, similar to the amount it had put into the $14 billion infrastructure fund raised by Canada-based Brookfield in the first half of this year. The Brookfield fund reportedly had attracted a total of $700 million from major South Korean institutional investors.
Infrastructure and real estate are gaining ground among domestic pension and savings funds as alternatives to underperforming stocks and bonds. A South Korean LP source said: “Generally, infrastructure assets are classified as safe assets and pay out dividends every year. That’s why they are gaining popularity among domestic LPs.”
The POBA source said that it continues to look for fund management companies to expand infrastructure investments, in pursuit of assets producing stable, long-term returns.
POBA’s Chief Investment Officer Dong-hun Jang told the Korea Economic Daily in an interview last May that the association needs to make a new commitment of at least 480 billion won to alternative investments this year, considering its exit plans, and the share of alternative assets may exceed half of its total AUM by the end of this year.
The new Macquarie fund comes as Australia is looking to privatize part of state asset to cover a budget deficit after the resource boom fizzled out. Macquarie, known for infrastructure investments, has invested in 180-odd infrastructure assets around the world, of which it made a successful exit from about 50 assets. The investment bank runs funds investing in Australia’s infrastructure which has around 7 billion Australian dollars of AUM on aggregate.
By Donghoon Lee
<Edited by Yeonhee Kim>