KTP seeks multi-credit strategy across the US and Western Europe – exclusive

The Korea Teachers Pension, a Seoul-headquartered, government-backed retirement plan, is seeking managers with a multi-credit strategy covering the US and Western European, according to two sources familiar with the matter.

The pension fund’s search includes sub-strategies of private credit investment, such as mezzanine debt, unitranche debt and direct corporate lending, one source confirmed to PDI last Monday, adding that the pension fund is aiming to diversify its private corporate investment portfolio.

KTP typically commits as much as $1 billion yearly to offshore alternatives, said the source. The fund’s offshore private credit manager roster includes Oaktree Capital Management, Crescent Capital Group and Blackstone’s GSO Capital Partners.

PDI understands that KTP previously committed $50 million to Oaktree Opportunities Fund Xb and $100 million to Crescent Mezzanine Partners Fund VII. It has also made several investments in GSO funds, including $100 million allocations each to the firm’s $7.12 billion GSO Capital Solutions Fund III distressed debt fund and the $4.5 billion Blackstone Real Estate Debt Strategies III opportunistic debt vehicle.

In addition, KTP plans to increase its offshore alternative investments, including private credit, private equity, real estate and infrastructure investments. Its latest target asset allocation level for 2019 has increased to 10 percent from 8.2 percent target allocation for the same year made in 2017 as of 30 November, according to the source. Its actual allocation level to offshore alternatives assets is as much as 8.5 percent in 2018.

The pension fund has revised its investment policy statement in line with its offshore plans to include a currency hedging measure, stipulating it does not need to revert any hedges back to South Korean won. This is because KTP saw a greater exposure to foreign exchange rate fluctuations between a foreign currency and South Korean won. The latest change is in effect as of 1 January 2018.

KTP managed $16 billion in assets as of 28 February and allocated 17.7 percent of its AUM to alternative investment strategies, split between national and international investments. Its allocation to offshore private debt strategy accounts for 40 percent of its overall offshore private investments, which includes private equity and private debt investments.