State-run Korea Post’s savings unit has appointed two US managers for its US$150 million private debt mandate, and at least half of that amount is to be allocated to US real estate debt, according to a local news report.
Private equity manager Blackstone Group will manage Korea Post Savings’ $100 million blind-pool real estate debt fund, while Principal Asset Management will oversee $50 million of mezzanine notes, The Korea Economic Daily says in a report on July 4. Both are for ten-year terms.
The managers are required to allocate at least half of the portfolio in their mandates to US real estate debt, and the overall average loan-to-value ratio should not exceed 80%, according to the report, which cites Korea Post.
Spokespersons for the postal agency could not be reached for comment, and spokespersons for Blackstone Group and Principal Asset Management did not immediately respond to questions from Asia Asset Management (AAM).
Korea Post President Kang Seong-ju said in an interview with Bloomberg last August that the postal agency plans to increase investments in private debt for better returns and to diversify risk.
Last year, its savings unit hired managers for $113 million of investments into so-called value-added real estate in Europe. These are investments in properties that seek to increase cash flow, such as through renovation and better management. The managers were not identified.
In 2016, Korea Post Savings hired unidentified managers to oversee $450 million of commercial real estate debt funds.
A Hong Kong-based fund analyst notes that top Korean institutional investors, including the National Pension Service, the world’s third largest pension fund, have been increasingly eager to invest in alternative assets for a number of reasons, including greater returns and risk diversification.
“In the alternative space, private debts such as distressed debts and mezzanine debts look appealing to the investors with their high risk-adjusted returns,” the analyst tells AAM, speaking on condition of anonymity.
Korea Post had 123.2 trillion won ($103.4 billion) of total assets at the end of 2018.