Korea Post's $65 billion savings bureau is seeking local and offshore single-strategy hedge fund managers to run fixed income arbitrage (interest rate arbitrage or credit long/short) and structured credit long/short.
This is part of a strategy to build a pool of hedge fund managers on which to draw for future mandates, as the institution plans to double its overseas allocation by 2020 and steadily raise its exposure to alternatives and equities, as reported.
The state institution, which runs the postal and financial services of Korea's post offices, already has hedge fund exposure and has been conducting this kind of search on a continuous basis as its portfolio has grown.
Korea Post will decide on the allocation size for the latest mandates once it has evaluated the managers’ performance. Submissions must be made by 5pm Korea time on June 7. The fund declined to reveal the planned number of managers or how much it has allocated to hedge funds already.
The new request for proposal comes after the savings bureau issued one last August for hedge fund managers of global macro, equity market-neutral, and event-driven strategies. It declined to confirm whether it has chosen those funds.
Korea Post's buildup of its hedge fund allocation reflects a growing trend among asset owners in Korea and elsewhere in Asia towards boosting alternative asset exposure.
Separately, Korea Post's savings bureau in February invited foreign fund houses to pitch for six equity mandates, in a bid to double its overseas exposure by 2020, as reported, but declined to comment further on this.
For the latest hedge fund RFP, Korea Investment Management, Korea Post’s adviser on overseas alternative investments, will help pick the managers.
Each applicant can submit up to two different funds, but only one fund is applicable for each of the two strategies. Korea Post’s existing hedge fund managers already are not eligible to apply.
Applicant firms must have at least $1 billion in AUM, with $300 million in the related strategy, and have been operating for at least three years. They must offer daily, weekly, monthly and quarterly or semi-annual redemption terms, with a lock-up period of one year or less. Managers must provide weekly NAV estimates and monthly official NAV figures.
The savings bureau plans to complete the first evaluation of the candidates by quantitative screening by the second week of June. It will then notify candidates who have made it to the second round. The second evaluation – involving a presentation and Q&A – to select candidates for due diligence will be done by the end of June. On-site due diligence will be completed by the fourth week of July, then the final selection will be made.
Other than the savings bureau, Korea Post has an insurance bureau, which manages $30 billion.