Student housing in Europe and Australian infrastructure are luring global funds out of their comfort zone, as a South Korean manager of local government employee savings joins peers around the world getting creative overseas in search of better returns.
Institutional investors from Seoul to New York are increasingly on the prowl for alternative assets, as low interest rates at home make it harder to meet promised payouts. In the latest example, South Korea’s Public Officials Benefit Association is considering putting money into a fund that invests in student housing in Europe along with other globally prominent pension managers, according to Chief Investment Officer Jang Dong-hun.
The fund targets annual returns of 5 percent, more than double South Korea’s 10-year sovereign bond yield of about 2.4 percent. That underscores the pressure the country’s investors face to wade into new areas, as a wealth fund and another pension fund have also stepped abroad more this year. Singapore’s sovereign wealth fund GIC Pte has invested in a $1.6 billion student housing deal with partners. “While it’s inevitable that investors need to expand investments into a variety of alternatives for better returns, there may be asymmetric information and various types of risks in global alternative investments,” said Song Hong-sun, a senior research fellow at Korea Capital Market Institute. The fund is also mulling co-investment in Australian electric utility assets, and is planning to invest $218 million in private debt in North America and Europe.