For GPs looking to raise institutional capital from one of Asia’s most active cross-border investor community, the message is loud and clear: open a local office.
At PERE’s annual real estate conference in Seoul today, senior executives from Government Employees Pension Service (GEPS) and Korea Post urged international managers to set up an outpost in the country and hire Korean investment professionals.
For Korea Post, the country’s postal worker pension fund, this factor significantly influences its decision-making process. As part of Korea Post’s qualitative evaluation, for instance, one criteria is whether the manager has a local presence or not.
Jin Ho Lee, head of global real assets, Postal Insurance, at Korea Post explained managers “have to have Korean investment experts in Korea”.
“[I] encourage them to open an office in Korea and have a Korean presence,” he said. “Having Korean-speaking employees might not be enough as long as they are living overseas.”
“For infrastructure and real estate, we are looking for long-term investments for 10 to 15 years,” he added. “I don’t believe it really makes sense, if we are making such an investment with a manager that has no Korean office.”
Lee’s appeal was echoed by GEPS’s Woncheol Suh, its head of private market investment.
“Business will not happen overnight or only after one meeting,” he said (translated from Korean). “[Managers] will have to make more efforts to build a relationship through trust and rapport. That is why we are asking that you open a Korea office.”
Government Employees Pension Service is one of South Korea’s top three public pension organisations, with around 1.5 trillion won ($1.3 billion; €1.18 billion) invested in alternative assets. Around 42 percent of the portfolio is invested in real estate, around 40 percent in private equity and private debt, and around 15 percent in other investments, including infrastructure.
For Korea Post, it matters more, given the investor’s ticket size. As Lee explained, the investor’s average commitment would be $100 million for a blind-fund vehicle or a project-based investment and could even go up to $200 million. Korea Post has 110 trillion won in assets under management, of which 3 percent is invested in overseas alternative investments.
On their part, both investors reiterated that they try to review a memo or teaser received by a manager for a potential investment and make a decision within one week. And the proposal is sent to the investment review committee with the next few weeks, Lee added.
The representatives from Korea Post and the GEPS both spoke about the need for managers to show “flexibility” and understand the constraints faced by Korean investors.
As Suh explained, Korean public institutions, for instance, are audited by the government and national assembly.
“We are strong controlled and limited by our budget. We are [also] under severe manpower shortage. We have people wearing many different hats [at work],” he said (translated from Korean). “Have more patience while dealing with us.”