[THE INVESTOR] Korea’s top institutional investor Public Officials Benefit Association plans to invest 200 billion won (US$177 million) in commercial properties in nine major US cities, including New York and Chicago, as it seeks aggressive alternative investments overseas, industry sources said on July 19.

POBA has committed the investment via KB Asset Management in a US$825 million private debt fund managed by Square Mile Capital, a subsidiary of USAA Real Estate Company. POBA’s investment takes up one-fourth of the total fund which has an investment period of 10 years with expected returns of 7-8 percent a year. 

POBA headquarters

POBA, which controls 11.76 trillion won in assets, is the second-largest benefit association in the country and has been looking for alternative investments amid a bearish domestic stock market.

POBA recorded the highest investment returns among eight top institutional investors -- three pension funds and five mutual aids -- with a yield of 10.1 percent. 

Having invested 25 percent of its assets in equities, the association’s portfolio was boosted by an upbeat stock market last year.

“We’re reducing the proportion of equities in our investment as the overall stock market has been sluggish this year,” an official at POBA said. “For real estate investments, we will focus on loan projects which are deemed safer than stock investments.”

This is POBA’s second alternative investment this year. In April, the mutual aid set up a 50:50 joint venture worth US$400 million with the California State Teachers’ Retirement System to invest in a US real estate debt fund, managed by finance and investment management firm PCCP.

In late 2017, the association committed around US$70 million to a US securitization fund backed by a real estate debt fund managed by an affiliate of Mack Real Estate Group.

By Park Ga-young (gypark@heraldcorp.com)