POBA allocates $200m to SMAs

The Korean pension is seeking two international managers to work with domestic firms.

South Korea’s Public Officials Benefit Association (POBA) has published a Request for Proposals (RFP) seeking two global private credit managers to handle up to $200 million via separately managed accounts (SMAs).

The mandate will focus on unitranche, subordinated debt and mezzanine debt investment with a target annual return of around six to seven percent or a final target net IRR from the fund of around eight percent, according to POBA.

POBA will allocate $100 million to each manager and the account is expected to have an operating period of seven years. The mandate seeks international managers to work with domestic investment firms which it will pick separately, according to POBA.

“The SMA is pretty much custom-tailored for each investor. It can facilitate GPs to make faster deal sourcing and to make quick decisions whenever they find a right investment opportunity. It is easier for both GPs and LPs in terms of portfolio construction,” Dong Hun Jang, chief investment officer at POBA, commented on the advantages of SMAs during an interview with PDI earlier.

Qualifying global managers must have track records in the liquidation of a private credit commingled fund and have been managing an SMA with the same strategy as of end-2016.

They are required to submit proposals via South Korean brokerage houses before 7 July.

In May, POBA selected Alcentra and Ares to manage a total of $100 million of mezzanine debt in Europe and the US. The mezzanine allocation accounts for 6.4 percent of the pension fund’s overseas private equity fund allocation of 16.5 percent, according to a POBA presentation.

POBA made its first overseas mezzanine commitment in 2015 and its total commitment to the asset class reached $160 million by the end of last year.