Korea Post looks to expand asset classes that can hedge inflation and earn benefits from rising interest rates despite concerns of stagflation and challenges of sustainable investment, Charles Lim, head of the alternative investment division at Korea Post’s postal savings arm, said on Wednesday at an LP panel session during ASK 2021.
“We expect next year to be a year when we will verify if high market multiples can be justified. The gap between increased asset prices and the real economy will be reduced as monetary policies are normalized. Also, the economic cycle should be considered as we are in the second half of a mid-cycle,” Lim said.
The postal savings arm focuses on reducing performance volatility for alternative assets, private equity and private debt through a gradual increase of the asset classes and long-term management of the vintages, he noted.
To secure more private debt and equity investment opportunities during the pandemic, Korea Post has established an internal system to diversify investment methods such as strategic partnerships with other institutional investors and requests for information (RFIs), he explained. Facing travel restrictions, it has also proceeded with investments through virtual due diligence and its global branches.
These efforts helped the saving arm's investment activities this year, he said. "We invested in direct lending in early 2021 as loan prices are expected to recover further compared to equity prices. Also, we are proceeding with a co-investment strategy in time for the fundraising of some top-tier general partners (GPs)."
"Korea Post is reviewing investments in secondaries and fund of funds to expand its private equity investment," he added.
Lim noted that more global GPs should suggest investment opportunities to Korean limited partners (LPs) as many Korean institutional investors allocate a significant portion for private equity and private debt assets and have gained a lot of experience. He also said more international GPs should consider setting up Korean offices for more efficient communications with LPs.
The assets under management (AUM) of the postal savings arm is 86 trillion won ($73.5 billion). It aims to increase the portion of its alternative assets from the current 8% to 10% by 2025, while more focusing on hedge funds than infrastructure assets for better liquidity. The unit’s private debt and private equity assets take a combined 3% of the total assets, aiming for a 7% internal rate of return.
Write to Jun-Ho Cha at
chacha@hankyung.comJihyun Kim edited this article.
