The Government Employees Pension Service (GEPS), one of the four public pension programs in Korea, will make its maiden blind pool fund commitments next year, according to Young Gwon Choi, the chief investment officer of the investor’s investment management division.
Speaking at the PERE Global Investor Forum in Seoul on Wednesday he said that, while in the past the investor has preferred to make real estate investments on a standalone basis rather than in funds, next year GEPS will make its first real estate blind pool commitment and will shortly issue request for proposals.
“We will trial blind pool funds next year so we are seeking advice from outside people and this will help us learn internally too,” he said. “We are focusing on overseas markets, [our] global real estate exposure will be increasing exponentially compared to domestic [property].”
GEPS, which currently has assets under management of around $6 billion, is also planning to lift the proportion of alternative investments by 2 to 3 percentage points in 2017 from this year’s 16 percent, according to Choi and he hopes that the proportion of real estate investment within this allocation will grow by 50 percent. By 2021, overseas and alternative assets are projected to make up nearly half of the GEPS portfolio.
The firm has already made a foray into overseas real estate and back in April GEPS invested KRW 50 billion in a building in Canberra in April, following a similar purchase in Melbourne last year. The investor also acquired a stake in the Astro Tower in Brussels for KRW 50 billion in July.
Choi added that the increase in overseas real estate investing will come in spite of global political uncertainty. “We were concerned about cap rates, discounts, and inflation in the future in the US, but we still believe it is the strongest market in the world and will continue in our existing projects. I don’t feel overburdened by the uncertainty of the macro.”
Min Ho Park, chief investment officer, Teachers’ Pension, also speaking at the PERE Global Investor Forum, echoed Choi on political instability. But, Park added that global macroeconomic headwinds mean Teachers’ will be lowering its return expectations for real estate.
“Our target for real estate and AI [alternative investments] was 5 percent but in the current situation it is difficult to achieve that and we will have no choice but to reduce our target expectation for alternative investments.”