The Public Officials Benefit Association (POBA) of South Korea plans to increase its allocation to infrastructure and is eyeing funds that are invested in core assets in mature markets.
The pension has so far committed KRW250 billion ($227 million; €204 million) to nine infrastructure investments in both domestic and international markets, excluding its latest commitment to Macquarie's new Australian infrastructure fund, a source told Infrastructure Investor.
POBA has recently approved a A$60 million investment in the A$1.5 billion vehicle, which will be invested in core infrastructure assets, such as those coming out of the country’s privatisation programme.
POBA is also looking for investment opportunities in Europe, North America and Oceania, where core infrastructure assets with stable cash yields are on offer. Developing markets, on the other hand, do not suit its risk appetite, the source said. The source added that the pension has not set a long-term target allocation for infrastructure.
Dong-hun Jang, POBA’s chief investment officer, told local press that the pension needs to make a new commitment of at least KRW480 billion to alternative investments this year. Considering its exit plans, its alternatives allocation may exceed half of its total $7 billion of assets under management by the end of this year.
Korea's finance ministry said that public pension funds, including the National Pension Service (NPS) and schemes for government officials, military personnel and social insurance agencies, should explore joint alternative investment opportunities, in an announcement released after a policy meeting with seven state-run pensions last month.
The government will gradually raise the overseas and alternatives proportion of the state-run pensions by between two to three percentage points every year. Under the new investment plan for these public pensions, NPS is expected to boost its allocation to overseas and alternative investments to 40 percent by 2021, while the Government Employee Pension Service will increase its allocation to around 44 percent in five years.