MIPIM 2012: Samsung Fire & Marine adds funds to direct strategy

Korea’s largest non-life insurance company reveals to PERE that it has devised an investment strategy for 2012 that, for the first time, includes putting its capital to work via funds alongside its main focus on direct investments in core property markets.

Samsung Fire & Marine Insurance (SFMI), Korea’s largest non-life insurance company with just less than $30 billion in assets under management, is to add real estate funds to its main direct, core real estate investment strategy.

Jin Seo, the group's manager responsible for real estate investments , told PERE on the side-lines of the MIPIM conference in Cannes, that SFMI would pilot its first fund investment as part of an investment strategy for 2012. Previously, the group, which generates capital from its insurance sales, had only sought to invest directly.

“The atmosphere for Korean institutional investors is changing a little,” Seo said. “Right now, investors are considering more fund investments.”

Currently, the plan to invest in funds is only at a pilot stage. SFMI expects to put at least $100 million of its capital into real estate globally in 2012 and, of that, just $30 million has been earmarked for a fund. Still, Seo said that allocation could increase given a positive experience and more viable opportunities coming its way.

“It could be a core fund, an open-ended fund or even a debt or mezzanine fund,” Seo said, adding that the fund could be focused either on Europe– where much of SFMI’s global attention has been of late – or the US. However, he noted that a cheque would not be written out to an opportunity fund at this stage.

SFMI’s alternative investment department, within which the insurer’s real estate assets are held, is one of a small handful of Korean institutional investment platforms to have been given clearance to invest outside of Korea. To date, it is yet to complete its first international investment.

Two club-style transactions in London were close to being completed over the past two years, but those deals fell out of bed. One was terminated after two other Korean institutional investors in its club did not get clearance from their investment boards to proceed with the acquisition. The other did not materialise after the seller pulled out.

Nonetheless, SFMI’s main focus remains on completing two or three direct investments via Korean institutional investment clubs before venturing to take on a separate account, whereby it is the sole source of capital. In terms of favored geographies, SFMI still wants to complete acquisitions in London and Paris, and possibly major cities in Germany as well, Seo noted.

Ultimately, SFMI’s mandate is to seek yields from global real estate that are considered an improvement on returns currently generated by Korea’s fixed-income products. “Five-year government treasury bonds now generate a yield of about 3.75 percent,” Seo noted. “If we can invest in core assets in prime property markets, we can produce something that is higher.”

Furthermore, Seo told PERE that, as of the start of this year, he has been made responsible for both the group's global and domestic real estate activities. He previously was solely responsible for global real estate investments but was granted the widened remit after a senior colleague moved on from the group. He works in a team of seven professionals, part of the alternative investment department’s 16-strong team.