Korea Teachers selects US-based PE firms

The $11 billion pension fund picks Hamilton Lane and Paul Capital to invest $30 million each in global private equity plays as it moves to increase its international PE exposure.
Korea Teachers selects US-based PE firms

Korea Teachers Pension Fund (KTPF) has assigned two US-based PE funds to invest $30 million each as it strives to ramp up its allocation to international private equity opportunities.

The KTPF, which managed $11.2 billion at the end of 2011 by AsianInvestor numbers, selected Hamilton Lane, of Philadelphia, and Paul Capital, of San Francisco, after a four-month process.

Kim Tae Hyung, manager of the fund’s strategic outsourcing team, tells AsianInvestor it plans to increase its global private equity exposure to 15% of its overall PE portfolio by 2018.

He did not reveal what the percentage was previously, but it is understood that the KTPF has around $600 million invested in private equity as at the end of last year. It has been reported that KTPF has about $1.6 billion in alternative investments, both global and local.

Last year it invested $300 million in alternatives, including real estate and private equity. KKR was the first foreign PE fund to be entrusted with money, winning a $30 million allocation back in 2011.

The latest mandates are for a duration of 10 years and on a capital-call basis. While KTPF initially specified it wanted its $60 million to be invested within five years, Kim indicates it wants the money fully allocated in the first half of this year.

In all a total of 11 secondary PE managers applied for the mandates, a list which was narrowed down to six after initial screening. The KTPF considered a number of factors, including past performance, alignment of interests and staff turnover.

The fund stressed that the winners would need to be registered with the Financial Supervisory Service, which supervises financial institutions in Korea.

In August last year, AsianInvestor reported that public pension funds in Korea were amassing assets, but that their internal staff resources were not keeping pace. This was forcing them to seek more external partnerships, with the problem most acute for mid-size funds such as KTPF.

KTPF is one of two financial managers set up especially for Korean teachers. The other is Korean Teachers Credit Union. Overall there are four Korean public pension entities: KTPF, National Pension Service, Government Employees Pension Service, and the Military Mutual Aid Association.

AsianInvestor named KTPF’s Lee Yun Kyu as CIO of the year in 2011, and KTPF institutional investor of the year in Korea last year.

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