Korean LPs attracted to overseas opportunities

The Korea Teachers Pension Fund is among a clutch of Korean investors looking to increase exposure to private equity overseas, according to a panel at the PEI Global Alternative Investment Forum 2012 in Seoul.

Korean institutional investors aim to increase their overseas allocations to private equity for yield and diversification in a low-interest environment, according to a panel discussion at the PEI Global Alternative Investment Forum 2012 in Seoul. 

Yun Kyu Lee, chief investment officer at the Korea Teachers Pension Fund, said his organisation has 500 billion KRW (340 million; $429 million) or 5 percent of total assets invested in private equity, admitting the amount “is not that big thus far”.

“The public markets are limited, so we plan to increase our investments in alternative assets overseas, including private equity funds,” he said. 

Lee added that the organisation has started to look overseas and last year made one foreign investment, though he did not provide details.

Hyuk-Do Kee, head of alternative investment at the Government Employees Pension Service (GEPS), which has $4.5bn in assets under management, is also looking at overseas private equity investments. “Private equity is an efficient tool and we believe it could deliver more gains,” Lee said.

He added that GEPS is sorting through an increasing number of proposals.

“Overseas private equity funds are making presentations to our organisation and they are increasing in number and frequency,” Kee said. 

“For us it can be difficult to choose. Based on our experience, whenever the investment looks good, the higher your expectations, the deeper you fall.”

Given the choice between developed and developing market investment, the Korean institutional investors preferred the emerging markets, though they acknowledged the risks. Kee added that a clear exit strategy and a hedge against foreign currency conversion risk would be some requirements before investing in emerging markets.

However, another speaker, Tim Pryce, chief executive officer at Terra Firma Capital Partners, preferred developed markets. 

He pointed out the attraction of Europe, despite headlines about the imminent failure of the Euro zone, which make the region a hard sell.

“[In Europe] there’s a significant shortage of capital and a large number of opportunities where private equity can make a difference,” Pryce said. “Europe is for sale.”