Korean pension funds to up private equity exposure in 2025: CIOs

South Korea's major pension and savings funds see no drastic reshuffle to their portfolios tilted to private debts next year. But they are looking to raise exposure to private equity such as leveraged M&As in 2025, which are expected to gain steam from lower interest rates, said their chief investment officers and alternative investment heads.

“It's time to look at other asset classes,” Suh Won Cheol, chief investment officer of KBIZ-Korea Federation of SMEs' savings arm Yellow Umbrella Mutual Aid Fund, told a CIO panel session at the global investment conference ASK 2024 on Wednesday.

“Interest rate cuts will make it easier to finance M&As and corporate investments, where I believe investment opportunities will arise. The exit environment will improve,” said the former alternative investment head of the Government Employees Pension Service (GEPS). 

Yellow Umbrella Mutual Aid Fund manges 25.7 trillion won ($19 billion) in assets, in which alternatives make up less than 10%.

Jun Beomsik, CIO of Teachers' Pension, said the pension scheme for private school teachers and employees had focused on secondaries in both private debt and equity segments over the past two years.

"We did not invest in buyouts this year. But we will invest across buyout, venture capital and secondaries [for private equity] next year," Jun told the session.

The Military Mutual Aid Association (MMAA) recently commited some money to an M&A fund in anticipation of a rebound in the buyout market, said Pai Hongkyun, who leads a corporate finance team at the military fund. The MMAA manages 12 trillion won in assets.

MID-MARKET DEALS, DISTRESSED PROPERTIES

Hanwha Life Insurance Co. and Kyobo Life Insurance Co. are interested in private equity deals, their investment managers said during the LP sessions. Hanwha will zero in on secondary, mid-market private equity deals, its CIO Shin Minsik noted.

The sovereign wealth fund Korea Investment Corporation, an active private equity investor, remains focused on mid-cap deals, which would have more room for valuation growth than large-cap private equity, said its private equity head Yoon H. Huh.

Lotte Insurance is exploring equity investments in distressed properties such as sharply discounted commercial buildings in central business districts, according to Park Jaehyun, managing director of its financial investment division.

The CIOs and alternative investment managers also said they are seeking geographic diversification of their private equity and debt portfolios beyond the US and Europe.

Write to Yeonhee Kim at yhkim@hankyung.com
 

Jennifer Nicholson-Breen edited this article