The recently reappointed chief investment officer at Korea’s Public Officials Benefit Association (Poba) has hinted that the $5 billion fund may seek to change its risk/return parameters.
Hyun Bong-Oh, who joined Poba last November for a three-year term, notes there are no official restrictions on its portfolio allocations or strategies (unlike other official pension funds in Korea).
As such, he says, it can be more flexible in that regard in terms of pursuing investment opportunities, while abiding by its internal investment guidelines.
Poba has cost of capital requirements of 5.5%, and its annual target return is between 6.5% and 7%.
Suggesting it may seek to change risk/return parameters would appear to indicate it is looking at diversifying into new investment opportunities.
However, Hyun tells AsianInvestor that the association will not make any investments it is not comfortable with. “I just have to have a good understanding of what we do,” he assures. “Otherwise it will be rather difficult to even think about new investment opportunities.”
At present Poba’s largest portfolio allocation is to equities at 40% of overall AUM, made up of local stocks and equity-linked securities. So it could be looking to diversify into global equities and funds, potentially via outsourcing.
The association has 22% in real estate (local and global), with properties in Dubai, London and Sao Paolo totalling $300 million. It has also invested $150 million in global equity funds.
Further, it boasts 12% exposure to alternative assets including private equity, although it has minimal investments in fixed income assets.
Poba has grown its assets from $3.6 billion in 2009. AsianInvestor interviewed Hyun’s predecessor, Lee Seong-Dong, in May 2010, when he revealed that its largest allocation was in corporate and development investment projects at 40.4%
At that time it also boasted 24.3% in domestic fixed-income assets and had a 20.7% allocation to domestic equity – revealing how much its portfolio has changed during the past two years.
Poba was established as the Public Local Administration Association in 1952 to provide financial and health security to those local government employees during employment and even retirement by offering an all-around life mutual benefit scheme.
It now boasts about 230,000 members and is administered by Korea’s public administration and security ministry, which also oversees the nation’s $7 billion Government Employee Pension Service.
Hyun replaced Lee Seung-Dong, former chief investment officer of POBA, who joined the company in November 2009.
Hyun was the association’s CIO before Lee took office, and as such his appointment was a return to his old position.
He started his career with Korea Investment and Trust Company (Kimco) as equity CIO, before moving on to Shinhan AITAS company. He is from Jeju Island and graduated from Korea University.