Teachers’ Pension, a South Korean pension scheme for private school educators, is grappling with how it will proceed with its ongoing selection process for its external alternative managers amid the spread of the coronavirus.
Private equity firms that submitted applications to be hired as an external alternative manager were recently notified that the pension fund will provide a detailed guidance on how to conduct its on-site due diligence process.
Teachers’ Pension initially planned to complete its quantitative evaluation and on-site due diligence by the end of March and announce the three PE firms between March and April after holding its investment committee meeting. Considering the timeline of the entire process, the fund should have announced its timeline for the on-site due diligence to six shortlisted PE firms by mid-March.
It is said that the pension fund is carefully reviewing its due diligence and presentation processes as those processes have to be done face-to-face for a long amount of time. Teachers’ Pension is expected to inform PE firms about its guidance after having internal discussions.
With more pension funds and mutual aid associations doing non face-to-face evaluations amid the spread of the coronavirus, some institutional investors have garnered attention by adopting new evaluation process. Korea Development Bank and Korea Growth Investment Corp. have received applications for external managers by mail only. Teachers’ Pension has accepted applications in-person, but some PE firms have reportedly submitted their applications by mail.
Industry insiders say that Teachers’ Pension may change the method of evaluations but it is very unlikely that the fund will delay the timeline. They expect the pension fund will announce the final results in April.
The fund plans to commit total 150 billion won to three PE firms – 50 billion won for each – which will be selected through a tender process. Due to the relatively large size of commitment, the fund’s investment program has drawn attention from many PE firms. The fund’s total commitments are a larger amount than commitments from other institutions ranging from 20 billion won to 40 billion won.
Military Mutual Aid Association (MMAA) committed 20 billion won to each of five managers in February, while the Public Officials Benefit Association (POBA) and the Government Employees Pension System (GEPS) respectively allocated 40 billion won to each of three PE firms in the same month.
Teachers’ Pension has closed applications for external alternative managers on February 28, with a competition rate of one out of almost three. (By Rho Ar-rum)