Korea’s Public Officials Benefit Association expects to remain active in real estate, despite the more challenging investment environment amid the coronavirus pandemic.
“We are preparing ourselves for new investments and we did finalize some investments despite the covid-19 disruption,” a POBA official told PERE. Last month, the investor finalized a $100 million commitment in a US single-family housing development fund run by JPMorgan Asset Management. POBA is understood to have started discussions on the fund commitment in late 2019, prior to the covid-19 outbreak.
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The pension also made a $200 million investment in US real estate investment trusts to take advantage of the market dislocation caused by covid-19. PERE understands that it approved a $200 million budget to invest US REITs in early March. In contrast to the fund commitment, POBA had identified the US REITs investment opportunity after the coronavirus outbreak and made the decision to invest within a week.
The organization is understood to have a special mechanism in place to proceed with time-sensitive investments during a market dislocation, according to the POBA investment officer. It has selected two real estate advisors to manage the REIT investments, and these advisors are currently in the process of building the portfolio. The official told PERE that the pension has a large cash balance and would not therefore be impacted by the large withdrawal for the US REITs investment.
Although REIT pricing has been hammered because of the volatility in the public equities markets, the officer said that POBA believes the underlying real estate assets in the REITs are relatively stable and cash-generating. It is understood that POBA previously invested around $100 million in US REITs at the beginning of 2018 when there was a dislocation in the derivatives market. POBA classifies REIT investments under its real estate allocation rather than its equities portfolio.
The pension will continue to focus heavily on real assets such as real estate and infrastructure, and is still open to investing in real estate funds despite the disruption. “I don’t think we will stop overseas investments for the time being,” said the POBA source. “But from now on, I do expect new investments may take longer to execute as all investment processes have slowed down due to the global situation.”
Currently, the investor has 54.6 percent of its $12 billion portfolio exposed to alternative investments. Real estate accounts for 28.3 percent of the portfolio.