South Korean pension selects LGT, Leadenhall, Nephila for ILS mandate

by Artemis on October 17, 2016

South Korea’s Public Officials Benefit Association, the pension fund manager for government workers pensions and among the largest public pensions in the world at over US$7 billion in assets, has selected LGT ILS Partners, Leadenhall Capital Partners and Nephila Capital for its first ILS mandate.

The South Korean Public Officials Benefit Association (POBA) is said to be the first public pension in the country to plan an allocation to catastrophe bonds and insurance-linked securities (ILS), after it was reported in September that the pension was running an asset manager selection process to allocate around 40 billion won (roughly US$36.6 million) to an ILS fund manager.

Now the process has ended and the Korea Economic Daily reports that POBA has selected three of the top ILS asset managers in the world to manage its entry into the insurance-linked investments space, naming LGT ILS Partners, Leadenhall Capital Partners and Nephila Capital as all having been selected at preferred managers for the allocation.

Insurance and reinsurance linked investments are gaining popularity among large pensions around the globe with South Korea now the latest country where the asset class is going to increase its profile among institutional investors.

In the current low to negative interest rate climate, ILS and investing in catastrophe reinsurance assets can provide institutional investors with a source of return that is largely uncorrelated with the moves of financial markets, hence their appeal is growing.

The South Korean Public Officials Benefit Association is set to allocate $40m to the ILS asset class through the three ILS managers it has selected, according to the Economic Daily citing a source at POBA. The pensions request for proposal attracted 20 responses from ILS managers around the world it reports.

Two rounds of screening took place, after which the three ILS managers were selected. Each is set to manage $10m to $15m of the ILS allocation for POBA.

““We have selected companies which fit with our commitment timetable and have strong track records among major foreign management firms,” the unnamed POBA source is reported as saying.

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