Samsung Life aims to have 50% of its infrastructure portfolio allocated overseas by 2025, up from 37% today.
South Korea’s largest life insurer and Asia Pacific’s 34th largest institutional investor according to AsianInvestor’s 2021 ranking of leading investors, manages over $300 billion in assets.
Its head of infrastructure, Jiho Park, told Private Assets Investment Week on Wednesday (September 15) that the firm has invested in South Korean infrastructure for over 20 years and in overseas infrastructure since he joined in 2014.
Infrastructure investments make up $8 billion, or 2.7% of Samsung Life’s total portfolio, of which, $3 billion (37%) is overseas, but Park wants to increase this to up to 50% by 2025.
The risks of overseas investing would guide how it did this: “It had no choice but to be rather cautious, conservative and selective in terms of region, sector and players,” he said.
So far, Samsung Life has focused on developed markets such as Western Europe, North America, Japan and Australia.
The investor is looking for “stable revenue-based investments” within infrastructure, Park said, highlighting "social or transportation PPP (public-private partnership) assets, regulated utilities, power or renewables with long term contracts, and midstream assets backed by underpinned contracts with credible counterparties.”
Samsung Life invests over 80% of its infrastructure portfolio in investment-grade senior debt as a rule of thumb. “Our sweet spot is between triple BBB and A ranges,” Park explained. Around 10% is invested in mezzanine and the remaining in equity.
“It is not only because we are a conservative insurance company, strictly regulated by our authority, but also because of our risk-averse investment philosophy,” said Park.
Responding to a question about new strategies and future investment, Park picked out digital infrastructure as a sector in which it is trying to grow its experience and exposure. The firm recently backed fibre optic projects in France and Spain and provided long-term senior debt to European data centers.
“We analysed those opportunities in detail and we are pretty positive of their opportunities, especially from the players’ market position,” Park said.
Faced with a rapid increase in assets under management – at the end of March, Samsung Life had $216 billion of assets under management – and resource constraints, Samsung Life is in the early stages of selecting external debt fund managers for an indirect investment strategy that would run in parallel with the direct investment one it has been using for its debt investments to date. It is considering using separately managed accounts (SMAs) to execute this plan.
“By assigning external debt fund managers for our debt investment strategy, we expect to overcome our physical challenges and achieve efficient portfolio management with risk diversification as well.”
Separately managed accounts, while typically carrying higher fees, offer investors more transparency and room for customisation.
The insurer recently told AsianInvestor it was also looking to use external managers to increase its exposure to overseas real estate. In May this year it purchased a 25% stake in real estate investor Savills Investment Management for $90 million, becoming its second-largest shareholder.
Other Korean insurers such as DGB Life are similarly foraying into alternatives in search of yield.
An important criterion for Samsung Life when evaluating external fund managers is their ESG (environmental, social, governance) track record.
“During the due diligence process we carefully check whether the manager’s strategy and philosophy are sufficient to meet our internal environmental and social policy, as well as global standards of ESG investments," Park said.
He added his infrastructure investment team had a target of investing over $400 million every year in renewable energy and other eco-friendly assets.
"We have currently around 20% of ESG assets in our infrastructure portfolio and are targeting to increasing it to up to 30% by 2025.”
AsianInvestor’s Private Investment Week took place between 13-15 September 2021.