Korea’s POBA to outsource private debt and cat bond mandates

17 February 2017   Category: News, Asia, Global, Korea   By Asia Asset Management

Korea’s Public Officials Benefit Association (POBA) is reportedly looking to tender its catastrophe bonds (cat bonds) and private debt funds mandates, worth an aggregated quota of US$200 million, to a roster of offshore managers in the second half of this year.  

The Korea Economic Daily quoted market sources as saying that POBA would allocate $120 million out of the $200 million in funding to private debt funds, while the remainder would go to cat bonds.

A beauty parade for the private debt funds mandate has been initiated and it is expected that the bureau will finalise the selection of five asset management firms later this month.

A POBA source explained that the initiative is deemed to be attractive as it takes less time to redeem investments from cat bonds and private debt funds compared to private equity funds. Despite cat bonds and private debt funds not offering high returns compared to other asset classes, they are a suitable alternative asset class for a savings fund that does not have enough fixed-income exposure, the source added.  

Last June, the POBA outsourced $100 million worth of private debt mandates to Benefit Street Partners, Babson Capital Management, and Permira.

The POBA became the first Korean institutional investor to dabble in cat bonds in September 2016, when it committed $40 million on aggregate to LGT Capital Management, Leadenhall Capital Partners, and Nephila Capital.

Apart from cat bonds and private debt funds, the POBA source told local media that the pension is looking to allocate about $500 million to $600 million towards new alternatives, including offshore real estate and infrastructure secondary funds this year.