Banking and trade association MG Korean Federation of Community Credit Cooperatives (KFCC) will invest 300 billion won ($251 million) in U.S. and European buyout funds to rebalance its portfolio and shift more market exposure toward overseas investment, the Financial News reported on Wednesday (July 8).
As of end-2019, 69.5% of KFCC’s 73 trillion won of assets under management were invested in domestic bonds, while its overseas investment accounted for only 5%. The low interest rates have persuaded the group to consider rebalancing this portfolio, as the economic downturn has made domestic bond returns highly vulnerable, media outlets said.
The shift was underscored by KFCC’s decision on Wednesday to mandate 100 billion won ($85 million) each to three private debt fund (PDF) managers, two in North America and one in Europe. These funds are supposed to provide senior loans to the buyout funds.
Key Korean limited partners like the National Pension Service, Korea Investment Corporation, National Agricultural Cooperative Federation and Korean Teachers’ Credit Union are already investing in or considering investments in PDFs. Typical terms of investment extend to 7-10 years for senior loan funds.
KFCC earlier announced it will invest 7 trillion won ($6 billion) in alternative assets in the next three years, with the overseas allocation reaching about 75% of the new amount. It said 56% of this investment will go to the corporate sector, including private equity funds and private debt funds, 22% to real estate and 22% to infrastructure. (Reporting by Hyewon Chang)