South Korean pension fund manager the Public Officials Benefit Association (POBA) has awarded mandates totalling $300 million to seven private equity managers spanning five different strategies, Private Equity International has learned.
POBA committed $40 million each to private equity firms Apollo Global Management and EQT Partners; $40 million for co-investments with fund of funds manager HarbourVest Partners; and another $40 million to Neuberger Berman.
The pension also awarded a $40 million secondaries mandate to Goldman Sachs and $50 million each to private debt managers Ares Management and Alcentra.
Earlier this year, POBA committed capital $120 million to five overseas private debt managers including US-based asset managers Guggenheim Partners and Medley Capital. Last year, the pension fund committed a combined $200 million to HabourVest, Pantheon and LGT Capital Partners.
POBA issued request for proposals in March and the investment committee went through a two-step process to select the managers. POBA chief investment officer Dong Hun Jang told PEI the first round is a qualitative screening process, while the second round is a so-called “beauty contest presentation”, in which the GPs make presentations to the pension fund’s investment committee, composed of POBA officials and external professionals.
Jang added that POBA’s investment strategy is “quite conservative” and focused mostly on developed markets.
“We are in the process of establishing an overseas private equity portfolio concentrated mostly in the EU and North American markets. Once we have established our core private equity portfolio, we may consider emerging markets. However, this is not a priority for the time being,” Jang said.
Jang also pointed out that POBA’s private equity portfolio is still overweight in domestic investments compared to overseas investments. The pension has committed capital to IMM Private Equity, STIC Investments and Korea Investment Partners, PEI data show.
POBA, which manages about KRW 10.1 trillion ($9 billion; €8 billion) of government workers’ pensions, allocates almost half of its portfolio to alternative assets.
POBA currently has a 12 percent exposure to domestic and overseas private equity investments and expects to maintain this for the time being, Jang said. The pension is, however, gradually increasing its overseas exposure, which currently stands at 24 percent of its overall AUM, to over 30 percent within three years.
“Our game plan is to achieve between 5 percent to 6 percent absolute returns with less risk and volatility, that’s the area we really like. We do not seek double digit returns; our investment committee generally thinks that emerging markets are riskier than developed markets,” Jang said.
POBA is also looking into setting up separately managed accounts for private equity, he added.