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IGIS adopts 13-year term for latest NPS-backed fund – Exclusive

IGIS Asset Management has raised almost double the equity for its second core/core-plus discretionary real estate fund.

IGIS Asset Management is testing the waters by launching a commingled, discretionary real estate fund with a 13-year term, believed to be the longest duration closed-end vehicle in South Korea, PERE has learned.

The Seoul-headquartered firm has raised 500 billion won ($420 million; €380 million) of equity in the first and final close for the core/core-plus real estate fund, according to two people involved in the capital-raising process. The National Pension Service of Korea is understood to have committed half of the fund’s total equity. Other investors include Korean insurer KDB Life Insurance, state pension Police Mutual Aid Association and the Ministry of Employment and Labor. A Malaysian institutional investor is the only foreign institutional investor in the fund.

IGIS’s decision to opt for an extended fund life is driven by its desire to hold the invested core stabilized assets for a longer period, akin to an open-ended vehicle’s strategy. According to one person involved in the capital raise, the South Korean asset management industry is not yet mature enough, especially in terms of investor demand, for an open-ended fund. This prompted the firm to propose lengthening the closed-ended fund’s maturity to its LP base.

The strategy appears to have worked for the investors, all of which agreed to the proposal. According to PERE’s second source, the investors also stated their preference to continue being invested in a longer-life vehicle instead of being forced to reinvest capital in new opportunities after the fund’s liquidation, especially given the growing size of their own reserves.

The fund will have the standard two-year investment period. In terms of sectors, the firm is targeting logistics, offices, hotels and mixed-use assets in Seoul and other select markets. Part of the fund will be allocated to core-plus investments.

IGIS’s latest vehicle is the successor to its debut fund, which raised 220 billion won in equity two years ago from NPS, the Ministry of Labour and Employment, and PMAA. The firm also raised 600 billion won in co-investment capital. The fund, which had a 10-year term, has been fully invested in four assets. According to the two people we spoke to, the firm is targeting 7-9 percent gross returns from the fund. One of the fund’s investments, including co-investment capital, was Signature Towers, which was acquired for $635 million in 2017 in what was believed to be the largest real estate transaction in Seoul that year.