Korea Post allocates $300m to senior debt strategies

The pension fund has allocated $300m to strategies managed by Guggenheim, Park Square and Partners Group and is expecting a 6% IRR from investments in senior debt.

Korea Post Savings, one of South Korea’s largest pension funds with $60 billion assets under management, has allocated $300 million to senior debt strategies.

Guggenheim Partners, Park Square Capital and Partners Group have been selected by the pension fund to manage a $100 million allocation each, according to the Korea Economic Daily.

Under the terms of the agreement, each firm will manage the capital and seek returns of 6 percent from investments targeted at the North American and European private debt markets.

A representative at Korea Post told the Korea Economic Daily that it will “continue to expand investments in offshore private debt funds”. Korea Post was contacted by PDI but did not respond to a request for comment before press time.

The pension fund started its search for managers in May. As part of its search, fund managers were required to have at least a minimum of $500 million of assets. Furthermore, selected funds were requested to have invested 2 percent of their own capital and ensure one single investment in the portfolio does not consume more than 35 percent of the total firepower.

Both Park Square and Partners Group declined to comment on the investment.

A spokeswoman for Guggenheim told PDI: “We’re excited about managing private senior secured debt for Korea Post. We have significant scale and experience in sourcing and originating private loans and believe the market opportunity remains attractive.”

Guggenheim has experience working with South Korean clients. Earlier this year, the New York-headquartered firm priced a $410 million CLO, for which South Korean investors supplied $166 million of the total capital, including 100 percent of the equity, a market source told PDI.

It has been a busy year for Korea Post as it increasingly looks to a diverse range of private debt investment strategies in its search for yield. In August, the pension fund began its search for asset managers to handle its CLO portfolio. A tender offer was published and offers were restricted to firms with a minimum AUM of $10 billion.

In the same month, Korea Post cast its eye on the US real estate debt market. The investor began its search for a manager to handle its $450 million commitment to the asset class. Similar to senior debt investments, the commitments will be split across three different managers and will be placed into SMAs. Managers are expected to achieve a 3.8 percent IRR and the accounts are expected to invest in ticket sizes above $20 million and be exposed to five different loans.