Government Employees Pension Service (GEPS) plans to invest in overseas infrastructure funds as part of an effort to boost alternative investments abroad.
The South Korean fund will issue a request for proposals (RFP) at the end of next month to award an overseas infrastructure mandate totaling 150 billion won ($136 million) to three managers, according to industry sources.
It would be the first such move by the pension fund. The RFP is expected to draw attention from global private equity firms such as KKR, Blackstone and Macquarie. Each of the successful managers would be awarded 50 billion won to invest in infrastructure assets around the world.
GEPS also plans to look for opportunities to invest in foreign infrastructure funds on a deal-by-deal basis from the second half of this year. The move aligns with the pension scheme’s long-term strategy of increasing its exposure to overseas alternative investments, allowing it to better react to increased market volatility and diversify its portfolio away from traditional assets.
GEPS is not alone in its efforts to increase investments in foreign funds focusing on real assets. Faced with repeated Covid-19 lockdowns worldwide, many South Korean institutional investors have chosen to invest in foreign real estate and infrastructure through funds managed by global investment firms, rather than direct investments.
In January, KKR closed its first fund targeting real estate investments in Asia Pacific at $1.7 billion. The National Pension Service committed 220 billion won to the fund, and other South Korean investors included the Korean Federation of Community Credit Cooperatives and the Korean Teachers’ Credit Union, which committed 10 billion won and 55 billion won respectively.
GEPS had 8.2 trillion won in assets under management at the end of 2020, with 3.2 trillion won (39.2%) allocated to bonds, 2.7 trillion won (33.5%) to stocks and 1.9 trillion won (23%) to alternative assets. It plans to spend about 300 billion won on new alternative investments to raise its allocation in the asset class to 24.9% by the end of this year.
The pension fund achieved a return of 880.1 billion won last year, exceeding the previous record of 775.9 billion won in 2019. (Reporting by Si-eun Park)