Hyundai Marine & Fire Insurance to raise exposure to mid-sized buyouts
Korea’s Hyundai Marine & Fire Insurance plans to raise allocations in the buyout funds, a senior company executive said.
“We are going to increase some exposure to middle-market buyout funds, maybe next year,” Han Woong, head of the private equity and private debt team at the insurer, said during a fireside chat at AsianInvestor’s 14th Southeast Asia Investment Forum in Bangkok on November 8.
In addition, while the insurer sees no change to the risk appetite for private equity secondaries, “we need to increase our exposure to the primary market a little, including buyout and growth equity,” he said.
Han's views reiterate what he said at another AsianInvestor event in Seoul earlier this year.
Hyundai Marine & Fire
Insurance
Hyundai Marine & Fire Insurance has previously also invested in large-cap growth buyout funds and growth equity funds.
Hyundai Fire Insurance’s assets under management total about $40 billion. Almost 30% is invested in alternatives, including real estate and infrastructure.
Han’s team, which covers private equity and private credit, manages about $3.5 billion in assets. Assets between private credit and private equity are roughly split 60:40.
“We started in 2014 with [investing in] private equity secondaries,” he said.
The non-life insurer, one of the largest in South Korea, has invested in real estate and infrastructure as part of alternative allocations for more than 20 years.
The appeal of some alternative asset classes among institutional investors in Korea has grown due to a mix of regulatory and market factors.
REGULATORY IMPACT
Some Korean insurers earlier told AsianInvestor said under the new regulatory regime, they prefer private debt, while others backed private equity buyouts, especially as interest rates start sliding.
The new regime refers to the implementation of the Korean Insurance Capital Standard (K-ICS) and the adoption of IFRS 17 in 2023.
These new frameworks are, among other things, influencing capital requirements related to investments.
Private market assets with relatively high capital requirements — equity in particular — are now being scrutinised, Korean insurers told AsianInvestor earlier this year.
“Korean insurance companies typically shy away from investing in high-risk capital charge assets, including private equity,” said Han.
Still, Hyundai Marine and Fire Insurance has continued to invest in private equity, primarily because it has managed portfolio construction appropriately, according to Han.
“I don’t think we will have a very drastic change because of regulations although we might adjust a little from a portfolio management perspective,” he said.
EXIT OPTIONS AVAILABLE
The private equity landscape has also evolved, enhancing the appeal of different opportunities.
For more than a decade in Korea, insurers, and even National Pension System (NPS), the world’s third-largest pension fund, and sovereign wealth fund Korea Investment Corporation (KIC) liked to invest in large cap buyout funds, Han said.
“But in the past three years, that situation has changed and [it is likely] there will be some problems with exit strategy implementation.”
“There will be more opportunities for institutional investors to invest in mid-cap buyout funds and there will be the flexibility to have some exit strategies,” he said.
“More deal sourcing channels are also available for mid-market buyout funds,” Han said, noting that even NPS and KIC have plans to increase some mid-market exposures.
Given all the market, interest rate and regulatory changes that insurers have to contend with, Han said risk-adjusted returns remain the key focus for insurers.
Han has previously also said he is not keen on niche strategies with private equity being marketed to asset owners, noting that insurers are not fans of such strategies.