Samsung insurers look abroad for GPs, blind pool funds
In an effort to hedge against inflation and to bridge in-house knowledge gaps, Samsung Group’s insurance businesses are looking strategically abroad.
Samsung Life Insurance, Korea’s largest life insurer, is increasing investments in overseas real estate through overseas general partners (GPs), while Samsung Group’s other insurance arm, Samsung Fire & Marine Insurance, is considering investing in overseas blind pool funds and private equity funds managed by global firms for infrastructure and real estate investments.
“Internally, our inflation outlook is mixed, but we think having assets that can be used as inflation-hedging tools within the portfolio is more important than the outlook,” Samsung Fire & Marine Insurance’s Chief Investment Officer Baek Song-ho told AsianInvestor.
At a panel discussion during AsianInvestor’s 14th Institutional Investment Week Korea, Baek said the non-life insurer will continue to invest in mid- and large office properties with long-term lease agreements, which it has been doing in the first half of this year, as part of its efforts to incorporate inflation-hedging assets.
Currently, the market sees supply-side inflation as temporary. Once central banks start raising interest rates, it is believed that inflationary pressures will weaken.
Similarly, Samsung Life is increasing its investments with overseas GPs.
“We need to seek help from third parties including affiliates in areas like mergers and acquisitions, because there is a limitation to our capabilities,” said Samsung Asset Management’s executive manager Park Min-jae during another panel discussion at the same event. “In addition, we think collaboration with global players is needed in global real estate investments.”
Samsung AM is a wholly owned subsidiary of Samsung Life. Samsung Life had W244 trillion ($216 billion) of assets under management (AUM) as of the end of March. Fixed-income and equities accounted for nearly 80%.
Samsung Fire & Marine Insurance, meanwhile, manages W75 trillion ($66 billion) in investment assets as of March 2021, including 41.1% in bonds, 33.2% in loans, and 17.1% in equities.
RISKY BUSINESS
The importance of alternative investments has increased amid the low-interest-rate environment, but it is always difficult to find good alternative investments with less risks, Park noted.
“We are also making strenuous efforts to find out ways to invest directly in stakes of foreign insurers in the long-term. This is an important part of our efforts to find lucrative investments to increase the value of the company,” he added.
In late May Samsung Life expanded its equity investments into real estate when it purchased a 25% stake in real estate investor Savills Investment Management for $90 million, becoming its second-largest shareholder.
Local media reported on June 28 that Samsung Life is seeking to expand its equity investments in other alternative asset managers, including private equity firms, without stating more details.
Korea’s Police Mutual Aid Association (PMAA) and Local Finance Association (Lofa) also said at the same event that they are turning to blind pool funds for returns, while the ongoing Covid-19 pandemic is making it difficult to thoroughly assess contract structure or counterparties.