Korea’s POBA seeks infra partnership with global pension funds

CIO tells Infrastructure Investor it wants to grow its exposure to the asset class from 5% to 10% of its AUM within five years.

The Public Officials Benefit Association is looking for global pension funds to join it in infrastructure investments, chief investment officer Jang Dong-hun told Infrastructure Investor.

Jang estimated the $11 billion Korean public pension fund could contribute around $200 million to a first joint venture. “Gradually, we’ll be able to increase the size of the investments,” he added.

POBA launched a similar-sized partnership with an undisclosed US pension fund, focused on US real estate debt, during the first half of this year. It has yet to find “strong candidates” for a possible infrastructure partnership, Jang said.

Such a partnership would help the pension increase its exposure to the asset class, which stood at 5 percent of assets under management at the end of 2017. Jang wants that grow, saying “our investment in infrastructure assets might reach 10 percent of our AUM within a five-year timeframe”.

POBA currently manages $10.7 billion in assets, with 54.7 percent of that AUM invested in alternative assets, including private equity, real estate and infrastructure.

In addition to potential partnerships with global pension funds, POBA is also considering investing in open-ended infrastructure funds, as first reported by sister publication Private Equity International.

“We are studying how to implement an infrastructure-investment strategy that offers more liquidity, and we are reviewing open-ended infrastructure investments with redemption features,” Jang said.

POBA currently invests in infrastructure strategies in Europe, North America and Australia, focusing on transport and “strongly-regulated” utility assets. “Brownfield, well-established infrastructure assets generating regular cashflow [are] very important for us to achieve our target return on an annual basis,” Jang said.

He ruled out pursuing “double-digit” or “high single-digit” returns from its infrastructure investments, stressing: “We are really risk-averse – as long as the investment can provide 5 percent return with very limited downside risk, then we can invest in it.”

Jang said POBA has already committed “more than $1 billion” across 20 different infrastructure funds – mainly blind pool – but declined to provide more details.

According to Infrastructure Investor data, POBA has committed capital to five infra-focused funds: Macquarie Infrastructure Partners IV, Partners Group Global Infrastructure 2015, Brookfield Infrastructure Fund III, KB Fengate North America Infrastructure Fund I and Korea Infrastructure Fund 2.