Blackstone, KKR join race for Korean pension fund's real estate debt

GEPS will pick two out of the PE giants, Goldman Sachs and Starwood and commit a combined $70 million; target IRR is 7-12%

Government Employees Pension Service headquarters on Jeju Island, South Korea (Courtesy of GEPS)

Byeong-Hwa Ryu 1

2023-08-11 17:48:30 hwahwa@hankyung.com

Pension funds

South Korea’s Government Employees Pension Service (GEPS) has shortlisted four global investment firms, Blackstone, KKR & Co., Goldman Sachs and Starwood Capital Group, for its overseas real estate debt management, according to banking sources on Friday.

The Korean pension fund will see the candidates’ presentations, select two firms and commit up to a combined $70 million, or $35 million to each asset manager. Some 80% of the two blind pools should target Europe- or North America-based real estate debt funds, excluding non-performing loans (NPLs) and distressed assets.

Each fund should be commingled and closed-end, with up to a 15-year-term and a maximum six-year investment period with option for extension. The internal rate of returns are targeted at 7%-12%.

GEPS picked Apollo Global Management, Warburg Pincus and EQT Partners in June as its first overseas buyout and growth equity funds. The three firms will receive a combined $120 million in commitment, or $40 million each.

Founded in 1982, GEPS’ investment management arm manages 6.2 trillion won ($4.7 billion) in assets as of end-2022. Alternative investments account for 35.2% of the assets, followed by 35.5% in public bonds and 24.4% in public stocks.

The pension fund for government workers posted a 4.4% loss on investment last year. Alternative assets posted 10.2% return, but public bonds and equities logged 7.7% and 18.9% losses, respectively, hit by interest rate hikes and worsening geopolitical tensions.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Jihyun Kim edited this article.