PERE Seoul: POBA eyeing riskier outbound investments

The Public Officials Benefit Association (POBA), the South Korean local pension fund for government officials, is looking to diversify its overseas real estate holdings and pursue opportunistic and value-add strategies.

Speaking at the PERE Global Investor Forum in Seoul, Dong Hun Jang, POBA’s chief investment officer, said the pension fund will look to invest in different sectors and asset classes to achieve more stabilized cash streams.

“The interest rates are likely to go higher and higher. The shock will be felt imminently but when that happens we would like to be affected less negatively. So we are trying to diversify into new investment opportunities,” he said.

Jang mentioned logistics, healthcare, student housing and multifamily properties as potential investment choices in the US and UK. He also added that most Korean investors usually prefer single tenant buildings but he is keen to diversify risk and invest in multitenant offices.

With KRW 9.2 trillion ($7.9 billion; €7.4 billion) in total assets under management, POBA has been an active investor in real estate markets globally and 35 percent of its total portfolio is allocated to overseas real estate investments. The fund’s overall exposure to alternatives is around 50 percent.

In a sign of POBA’s increasing overseas investing ambitions, Jang said the pension fund is targeting to grow its alternative assets under management by KRW 1 trillion by end of next year. 

Jang admits that POBA’s past experience of investing in overseas real estate, some of which he described as ‘failures’, had made the pension fund more risk averse with a limited focus on core and core-plus assets.

“When we make an investment decision about new assets or sectors, both our internal teams and committees are new to those sectors so they tend to be passive,” he said.

Yet, the investor is opening up to higher risk strategies with the aid of external advisers. He said of the investment approval process: “When assets are delivered to investment committee, sometimes external experts come in and open up new horizons for new assets and new sectors. And what would otherwise be very unlikely to get passage in the committee is actually passed.”