Korea's NPS awards four mandates for real estate and infrastructure

Korea’s National Pension Service (NPS) has awarded KWR800bn (€621m) of mandates to four asset managers to invest in domestic real estate and renewable energy.

NPS - which manages KRW601trn on behalf of more than 21m Korean contributors - is giving IGIS Asset Management and Samsung SRA Asset Management KRW250bn each to invest in real estate, sources told IPE Real Assets.

Shinhan Alternative Investment Management and Samchully Asset Management will each get KRW150bn to invest primarily in domestic renewable energy assets.

The sources said IGIS, which is Korea’s largest asset manager, and Samsung SRA are now expected to seek co-investment from other institutional investors to launch their respective funds. 

It is believed each of these funds will likely have around KRW500bn of capital to invest, and with gearing, will create the largest funds for core and core-plus yet launched in South Korea.

One source told IPE Real Assets that when the asset managers received the first mandate of $190m (€167m) from NPS in 2016, they used it as seed capital to build up a sizeable fund.

At the time, IGIS, raised $510m from other investors, including Korea’s Ministry of Employment and its Labor Reserve Fund. NPS put in additional capital as co-investment.

IPE Real Assets understands that IGIS will again approach its key co-investors for the new fund, with NPS itself expected to invest an additional allocation above the mandated amount.

“With gearing, IGIS will have purchasing power of up to KRW1.3trn,” said a source.

NPS has given its asset managers “practical guidelines” on borrowings of up to 60%.

It is believed that IGIS had already been bidding for assets in anticipation of receiving the mandate, but the first deployment is not expected until after it has finalised co-investment early next year.

IPE Real Assets understands that the latest real estate mandate comes on the back of successful execution of the 2016 real estate mandate.

IGIS is thought to have fully deployed that mandate within 18 months, while Samsung SRA has one more investment to place before winding up its previous NPS mandate.

IGIS declined a request for comment.

What is termed “over-performance” has given NPS confidence to increase its allocation to real estate, according to industry sources.

In June, NPS awarded three mandates totalling KW600bn for its core, value-added logistics strategy.

NPS issued requests for proposals in August from both domestic and foreign general partners to implement its real estate and infrastructure strategies.

NPS is keen on office buildings in both Seoul’s central business district and in Pangyo, on the outskirts of the South Korean capital. Office will make up a maximum of 80% of the portfolio construction of funds to be seeded by the NPS mandate.

 

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