Korean LPs prefer face-to-face meetings with prospective GPs and have urged managers to do their research before talking to them, Infrastructure Investor’s Hong Kong Summit has heard.
Jake Jong-Kwan Lee, head of infrastructure at Hyundai Insurance, said that Korean LPs were building up their exposure to overseas infrastructure, but that understanding other markets posed a challenge.
“We want to monitor GPs we’ve invested in, but we have time constraints and human resource constraints. We say: come visit us, tell us what’s happening, share your experience and knowledge, and persuade us how we can help and how we can have more exposure to your countries and your funds,” Lee said.
Jiroo Eoh, team leader (infrastructure and real assets) of the investment strategy department at ABL Life Insurance, said that GPs had to be “very specific” when seeking funds from Korean LPs.
“Please be prepared, and please be patient [because] Korean investors are sometimes very shy,” he said.
“You may go into an investor meeting and see no kind of reaction – they won’t even blink their eyes. But if you meet them again and again, they’ll finally react and let you know what they want to do. Korea has acquired a huge amount of capital so [infrastructure is] a good opportunity for a lot of investors.”
Hyundai’s Lee echoed this, saying: “I get a lot of emails from GPs all over the world, suggesting a phone call. We don’t like phone calls. Having a phone call in English for shy people [like us] is very tough.”
Korean investors were still targeting OECD countries for infrastructure investments, the LPs said, because regulatory requirements in the country required 100 percent hedging. This, in turn, led to a focus on European investments over the US as currency swaps were far more attractive.
“We need [managers] to approach with the right product to the right investor. If we’re an insurance company, debt products are preferred. Korean investors are very eager to invest overseas in infrastructure – but you need to know the right trend, if it’s Europe or the US, and the right sector,” Eoh said.
“When we invest in US-dollar assets, we lose 1.5 percent just by doing a currency swap.”
Dennis Chan, head of insurance at China Ping An Insurance Holdings (Overseas), said that, as a Chinese LP with a global outlook, geography was the most important consideration, and expressed concern over rising valuations in some sectors and regions.
“We look at what country we want to be in [when selecting GPs] – it’s hard to compete in Canada and Australia because it’s expensive, so we avoid that, and certain sectors,” he said.
LPs also said that they wanted GPs able to provide sufficient scale, as well as those who would listen to their particular concerns.
“We want a manager who has good chemistry with us, who listens to us. There are some little bits and pieces of structures we might have to tweak as Korean investors, so we want someone who will listen and follow up with us,” Eoh added.
Hear from Korean LPs at the Infrastructure Investor Seoul Summit. Click here to find out more.