The Korea Post Savings Fund has issued a request for proposal (RFP) seeking pitches from local and global hedge fund managers with a view to creating a pool of managers for future allocations.
It is understood the $62 billion fund will select up to three finalists in each of four hedge fund categories by strategy and place them into an investment management pool.
At this stage the size of any future allocations is still to be determined; Korea Post is simply seeking to identify the best managers to work with.
The Korea Post Savings Fund announced plans to go into alternative investments at an AsianInvestor summit in Seoul in July last year, while the ex-head of real assets at Korea Post, Song In-kyu, predicted Korean institutions are set to become major allocators to the asset class.
Korea Post Savings Fund issued the RFP earlier this month, stating that the process was open to local and overseas hedge fund managers or financial institutions with a hedge fund offering.
Each applicant is allowed to submit two funds for consideration (one per strategy), while those that submitted an application in the savings bureau’s 2011 RFP are restricted this time around.
By management style, this process applies only to single hedge funds and excludes fund of hedge funds, structured products and notes.
The four eligible strategies are: credit relative value (fixed income arbitrage, credit long/short and convertible arbitrage); global macro; equity long/short (long biased or variable biased); and equity market neutral.
Each applicant firm must manage at least $1 billion in assets and have been established for no less than five years. To be considered each fund must be $300 million in size and itself have a minimum track record of five years.
As for liquidity, funds must have a quarterly redemption condition or less – hard lock-ups will not be considered – and provide weekly NAV valuation estimates and confirm monthly NAVs.
The selection process involves an initial evaluation by quantitative screening followed by a second evaluation in the form of a presentation. This will be followed by due diligence and then final selection.
The RFP submission period runs from November 5 to a final deadline of 6pm on November 30 (Seoul time). The initial evaluation will be completed in December and January.
Four hard copies of the marketing materials regarding the manager and the fund are required in free-style format, and English versions are allowed. Managers should also submit four hard copies of a summary (less than 10 pages) of the above marketing materials in Korean.
For enquiries about the RFP submission and process, you can contact the global hedge fund management department of Korea Investment Management through Yang Bong-Jin at [email protected] and Kim Dae-Sik at [email protected].
For clues on Korea Post’s thinking on alternatives, its chief performance officer, Jurng Chuljoong, penned a letter to AsianInvestor this year, firstly on where he sees opportunities in real assets, and secondly examining private equity, special situations, venture capital and hedge funds.
Korea Post is one of the country’s largest government-controlled institutional investors. It has two units: postal savings, with about $62 billion in AUM, and postal insurance, with $32 billion.
The former has a 50% allocation to fixed income, 40% to cash and others, and 5% each to stocks and alternative investments. The latter has 65% in fixed income, 16% in cash and others, 7% in stocks, 7% in loans and 5% in alternatives.