Korea’s NPS commits $650m to Americas funds

Six months after determining it would commit up to $1.2 billion of equity commitments to real estate value-added and opportunity funds, Korea’s largest institutional investor has made four commitments to managers deploying strategies in North and South America.

The National Pension Service of Korea (NPS) has signed off on four equity commitments totalling $650 million to real estate fund managers targeting investments in North and South America.

NPS, which had approximately $300 billion in assets under management as at the end of April, has committed $150 million each to value-added vehicles of Invesco Real Estate and Cornerstone Real Estate Advisors, $150 million to Colony Capital’s distressed credit fund and $200 million to a Brazil-focused fund managed by Tishman Speyer.

These four commitments by NPS, which are expected to be followed in the second half of the year by further commitments to opportunity funds, are the latest sign that Asian investors remain keen to take advantage of the continued pricing downturn and distress in core markets in the Americas.

NPS’s commitments to more traditional, blind pool commingled funds come after the best part of two years backing fund managers via separate accounts and on a direct deal-by-deal basis.

Indeed, the state fund, established in 1988 and today is the world's fourth largest, is yet to be joined by many of its sovereign wealth funds peers which have, for the most-part, pursued their real estate investments via separate accounts, investment clubs or on a direct deal by deal basis.

NPS is currently working towards a target investment allocation of up to 10 percent to alternative assets, including real estate, by 2015. As of last year, alternative assets counted for just less than 6 percent, according to its official statistics.

News of its commitments has surfaced at a time of relative increased activity among limited partners in the higher risk/higher reward real estate fund space after a patchy first half to 2011. In the last month alone, PERE has reported on sizeable commitments made to funds from or related to firms including The Blackstone Group, The Carlyle Group, Lubert-Adler Real Estate and Alcion Ventures among others.

Many of these commitments have come from the US pension funds including The Pennsylvania State Employees' Retirement System, The Pennsylvania Public School Employees’ Retirement System, New Mexico's Public Employees’ Retirement Association and The New Jersey Division of Investment.

Further funds have been committed to managers of more bespoke entities such as the $1 billion office development and investment separate account from the New York State Common Retirement Fund to Hines or the logistics real estate partnership between the Oregon Public Employees’ Retirement Fund and ProLogis, both of which were announced in the last fortnight.

According to data from PERE Connect, just more than $18 billion was raised for value-added and opportunity real estate funds up to July this year, over $9 billion of which was raised for Americas funds.