South Korean institutional investors are increasingly integrating virtual tools such as video conferencing into the process of awarding mandates to managers as they try to minimize the impact of the Covid-19 pandemic on their investing activities.
Unlike traditional assets such as stocks and bonds, alternative assets like real estate and infrastructure are mostly privately traded, which meant that institutional investors usually had face-to-face meetings and site visits before making investments.
However, virus lockdowns and social distancing measures have forced them to become more flexible with their processes for selecting asset managers.
The Construction Workers Mutual Aid Association recently changed its guidelines so that due diligence could be conducted in a contact-free manner when circumstances did not allow for in-person due diligence.
Korea Development Bank (KDB) and Korea Growth Investment Corp (K-Growth) are also embracing virtual tools when selecting managers. When the pandemic struck last year they selected managers for private equity and venture capital mandates in a process that included video conference presentations and remote due diligence.
KDB and K-Growth is using the same virtual process for selecting managers this year for the New Deal mandates. The shortlisted candidates are required to give a presentation and take questions through video conferencing.
Sovereign wealth fund Korea Investment Corporation also revised its internal rules last year to allow virtual due diligence, adding a provision that states “On-site due diligence can be conducted by an actual visit in principle, but other means including a video conference and conference call may replace an actual visit if there is an unavoidable reason.” (Reporting by Hee-yeon Han)