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Korea Life Insurance Committing USD 1 billion to Real Estate

by Ee Fai Kam

  • 15 Feb 2012
  • RE

Korea Life Insurance (KLI) is an active investor in the real estate asset class, and intends to commit USD 1 billion over the next 12 months. It gains property exposure via direct investments and private property funds, typically committing between USD 30 million and USD 50 million to a single vehicle. An international investor, it commits to Korean, Australian, European and US-focused funds. The insurer prefers core, core-plus and debt vehicles, which have been its strategies of choice since 2011. It will consider co-investment opportunities and separate account mandates with fund managers, but will not take part in joint ventures due to regulatory prohibitions. Korea Life Insurance manages USD 65 billion in total assets, with 8.5% allocated to real estate. Of its overall property portfolio, 95% comprises of direct investments, while the remaining 5% is poured into private real estate funds.

Preqin’s Real Estate Online database contains many profiles of Korean investors in private real estate funds. Currently, Korean investors with an investment preference for unlisted property funds hold USD 1 trillion in assets under management (AUM), and have a combined allocation of USD 21 billion to the real estate asset class. Of these, 42% are insurance firms while 32% are public pension funds. The majority of Korea-based investors prefers fund managers with an established track record, with only 33% willing to consider investing in first-time funds.

In terms of strategy, 80% of investors situated in Korea prefer core funds, while 60% will invest in core-plus funds. Fifty-three percent have a preference for value added strategy and 60% are interested in opportunistic vehicles. About half of Korea investors will invest in debt funds, and only 40% opt for distressed assets.

National Pension Service (NPS) is the largest Korean investor to commit to real estate, holding more than USD 300 billion in AUM. It has an allocation of 2.5% to real estate and invests across most geographical regions and strategies. NPS does not invest indiscriminately, but varies strategy according to location. For developed markets such as North America and West Europe, the pension fund is interested in value added, opportunistic and distressed strategies. In Central and East Europe, the Korean investor targets value added funds, but prefers opportunistic vehicles in South America. The pension plan typically commits USD 100 million to USD 150 million per fund, and will only partner experienced managers as it is prohibited from investing in first-time funds. Besides private real estate funds, NPS also invests directly and will consider joint ventures, separate accounts and co-investments.

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