With recent regulatory changes and initiatives introduced by the South Korean Government, the country has been growing its alternative assets industry drastically. Preqin’s Infrastructure Online tracks 59 active infrastructure investors based in South Korea, accounting for 11% of the total Asia-Pacific-based infrastructure investor pool. South Korea-based institutions hold aggregate assets under management (AUM) of approximately $2.8tn, representing 7% of the total funds managed by all Asia-Pacific-based infrastructure investors.
A significant proportion (32%) of South Korea-based investors in the infrastructure asset class are insurance companies, followed by banks (22%) and public pension funds (19%). Given the long-term growth potential, low correlation to other asset classes and reliable income streams associated with the asset class, it is unsurprising that investor types holding long-term liabilities are the most prevalent among South Korea-based infrastructure investors.
With their knowledge of the local economy, and familiarity with the previous regulatory regime imposed on overseas investment, it is unsurprising that the majority (75%) of South Korea-based investors target the domestic market. However, many will look to developed markets: a notable 58% of these investors seek investment in North America, with an equal proportion targeting infrastructure investments globally. One such investor that has recently made its first commitment to an unlisted infrastructure vehicle investing in overseas markets is Korea Teachers Pension Fund. The public pension fund invested in Brookfield Infrastructure Fund III, which expects to target utilities, transportation and renewable energy sectors in North America, Europe and Australia.
South Korea-based investors will continue to look outside their domestic region for infrastructure investment opportunities. Preqin’s Fund Searches and Mandates tool on Infrastructure Online shows that 41% of South Korea-based investors are actively planning to invest in unlisted infrastructure funds, with 79% of these looking to invest outside South Korea. This includes half targeting North America-focused funds, 46% seeking investment in Europe and 58% taking a globally diversified view for their unlisted fund commitments. Among these investors, National Credit Union Federation of Korea is looking to invest KRW 150bn in five developed markets-focused unlisted infrastructure funds.