POBA bullish on REITs, real estate debts and senior housing

South Korea’s Public Officials Benefit Association (POBA) is betting big on real estate investment trusts (REITs) and senior housing in the US, while expanding real estate private debt investments, its Chief Investment Officer Huh Jang said on Thursday.

The retirement savings fund for local government employees has been ramping up private credit investments in recent years. Hub expects the asset class to continue performing well amid ongoing market uncertainty and heightened volatility in US long-term Treasury yields.

It is now increasing allocations to more liquid alternatives such as listed REITs, listed infrastructure and structured credit such as credit-linked obligations (CLOs) and commercial mortgage-backed securities.

"REITs remain resilient, supported by high-quality underlying assets and offer limited downside risks as the real estate market appears to have bottomed out,” Huh said in a keynote speech at the global investment conference ASK 2025.

“We believe REITs will significantly outperform during a future rate-cutting cycle and currently present a very attractive investment opportunity.”

REITs have reaped an internal reate of return of 11-13% per annum over the past five to six years, Harry Song, head of POBA's real estate investment division, said in a panel discussion on Friday.

Its real estate portfolio has primarily focused on private credit investments amid a decline in banks' direct lending, coupled with rising refinancing demand.

"We believe now is the right time to actively capitalize on private real estate debt opportunities that offer attractive risk-adjusted returns in the commercial real estate market," Huh told the biannual investment conference hosted by The Korea Economic Daily.

REAL ESTATE

Except for the office sector, Huh is optimistic about the US real estate market, which he sees as having limited downside risks after undergoing steep price corrections.

In particular, he is bullish on the senior housing sector. Early this year, POBA made an equity investment in a US senior housing facility.

However, it continues favor private credit.

“Opportunities in private credit markets are expected to grow further ... if inflation begins to feed through into rents and a rate-cutting cycle begins, this confluence may offer a strong vintage for medium- to long-term investment,” the CIO noted.

However, the office and logistics sectors are expected to remain subdued amid a grim economic outlook triggered by trade tensions. A divide between prime and lower-grade offices in the US is likely to deepen, he added.

POBA also remains cautious about Europe’s commercial real estate market, which he said faces refinancing difficulties.

The retirement fund operator manages 30 trillion won ($22 billion) in assets and allocates more than 70% of these assets to alternatives.

It is also raising exposure to structured debts, opportunistic strategies and private equity deals in niche sectors in search of higher yields.

INFRASTRUCTURE

Infrastructure is expected to remain attractive, supported by rising fiscal spending in major economies. The sector continues to offer growth potential amid the global energy transition, accelerating digitalization and AI-driven innovation, the CIO added.

Write to Yeonhee Kim at yhkim@hankyung.com
 

Yeonhee Kim edited this article.