SEOUL • South Korea’s state postal service is planning to buy riskier debt in North America and Europe, as well as seeking foreign infrastructure assets and properties, as it looks abroad for better returns.
Korea Post plans to increase investment in mezzanine and distressed debt by selecting high-performing asset managers, president Kang Seong-ju (picture) said in an interview in Seoul.
The US$112 billion (RM460.37 billion) fund is also adding infrastructure and real-estate assets abroad and putting more money in hedge funds, while reducing investment in stocks, according to Kang.
“We didn’t have to look at such debt last year because stock markets were so good,” Kang said, referring to relatively riskier debt.
Korea Post, which manages savings deposits and sells insurance at its mail offices, joins other conservative institutional investors in Asia increasingly wading into riskier alternative assets as they grapple with low interest rates and lacklustre equity returns.
While Korea Post’s allocation to those assets is still small, the move means it must manage risks posed by lower liquidity and less publicly available information on such investments.
Korea Post has put US$760 million in mezzanine and distressed debt, according to Kang. The fund has also invested about US$600 million in US collateralised loan obligations (CLOs) though it doesn’t put money in equity tranches due to the higher risk.
CLOs pool high-yield, highrisk loans and slice them into securities of varying risk and return.
Kang said he also met with Macquarie Group recently in Australia to boost infrastructure investments. For overseas real estate, the fund is looking to diversify its assets into logistics facilities in the US and Europe.
While Korea Post is reducing equities, the fund still favours some stocks in developed markets including the US and dividend stocks, while shunning emerging-market (EM) shares, Kang said.
The fund also plans to boost investment in hedge funds by 300 billion won to 1.6 trillion won (RM5.91 billion) by end- 2019, he said.
“Some people say it’s time to buy some beaten-down stocks in EMs, such as Vietnam equities, but we are still cautious about EMs due to lingering uncertainties,” he said.