Public Officials Benefit Association CIO Huh Jang speaks at ASK 2024 on May 22
South Korea’s Public Officials Benefit Association (POBA), a retirement fund with assets under management (AUM) of 26 trillion won ($19.1 billion), keeps a close eye on data centers, senior housing and student accommodation in Europe, Chief Investment Officer (CIO) Huh Jang said at ASK 2024 on Wednesday.
The sectors play a key role in diversifying portfolios and expanding revenue streams, despite higher risks than other real asset sectors, the CIO of the provincial government employees’ pension scheme said during a keynote speech at the alternative investment forum.
The European real estate market could be more beneficial than the US, given the expected rate cut timeline and supply and demand, Huh added.
The fund, which allocates 32% of its AUM for real assets, sees that this year’s real estate portfolio rebalance and new capital injection strategies will be important for returns over the next several years.
“Although real estate is a good hedge against inflation, the global supply of properties has significantly dropped amid high interest rates. It could be a great mid-term vintage year in a year or two, when inflation is fully reflected in rents and overlaps the rate easing cycle,” Huh explained.
In commercial real estate, it is time to seek private lending given the high demand for refinance and attractive risk-adjusted returns, Huh said. POBA is also considering a selective approach to equity investment in properties with robust fundamentals and price dislocation, Huh said.
POBA sees real estate investment trusts (REITs) as very attractive as the publicly traded securities are more undervalued than private real estate and will outperform in the rate cut cycle, he explained.
On infrastructure, POBA will focus on debt strategies that generate high cash flow and will increase exposure to energy transition and digitalization for mid-to-long-term revenue streams.
The pension scheme also plans to strengthen value-add assets and secondaries to diversify strategies.
The fund keeps a close eye on the rising demand for private capital in infrastructure and global policies to speed up the energy transition. There may be opportunities in energy efficiency-related assets such as multifamily housing, green office and idle land that could be used for renewable power generation, Huh said.
By Jihyun Kim
snowy@hankyung.com
Jennifer Nicholson-Breen edited this article.
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