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POBA’s Jang: 2021 will be a ‘challenging year for traditional asset classes’

The South Korean public pension fund’s chief investment officer explains why he is comparatively more bullish on the real estate sector than other asset classes.

The Public Officials Benefit Association, the Korean public pension fund with KRW16.3 trillion ($15 billion; €12 billion) in assets under management, is planning to continue increasing its global real estate exposure in 2021, with logistics, residential and debt being some of the key focus sectors.

In an interview held this week on the PERE Global Passport networking community, POBA’s chief investment officer Dong Hun Jang noted how the real estate sector had “suffered last year” and as such, has already reflected much of the covid-triggered market volatility.

“This year if we are active in market research, we will be able to find interesting real estate investment opportunities,” he said.

For POBA, real estate debt investments, for instance, are seen as an alternative to public fixed income securities, especially at a time when the latter, along with public equities, is anticipated to face performance challenges this year.

“Last year, public equities and fixed income securities had an unusually spectacular year. But I think traditional asset classes could pose a very difficult year compared to last year,” he said. “Public equities and fixed income securities suffered this year January, compared to last year. [And] based on my experience, the January performance is kind of a snapshot of this year’s whole performance.”

As of last year, approximately 60 percent of POBA’s portfolio was invested in alternative assets. The investor’s real estate allocation stands at around 29.7 percent of its overall portfolio, according to PERE data. Within the real estate portfolio, the majority – 80 percent – is invested in core and core-plus investments and POBA is keen to up its risk appetite and diversify into value-add investments.

A skew towards the non-traditional asset classes will also help POBA in maintaining its performance objectives for 2021. In 2020, it is understood to have exceeded its minimum 4 percent return target, although Jang did not provide specifics.

“POBA’s portfolio is more conservative and resilient,” he said about his return outlook for 2021. “We are not heavily invested in public equities or fixed income securities…If the public market suffers this year, POBA would be outperforming other competitors in the market.”