[THE INVESTOR] South Korea’s large institutional investors plan to buy more nonperforming loans in a bid to find investment opportunities from European banks that need to offload loans to meet new regulatory requirements, according to source on Aug. 11. 




The National Pension Service, Korea Investment Corporation and Lotte Insurance are expected to allocate over 400 billion won (US$363 million) in a distressed real estate fund by Cerberus Capital Management.

Among the three, the nation’s pension fund NPS plans to invest the largest chunk of US$200 million, followed by KIC with US$150 million.

Other investors including Kyobo Insurance and Korea Specialty Contractor Financial Cooperative are said to be mulling their participation in the fund.

The fund named Cerberus Institutional Real Estate Partners IV seeks to raise US$1.5 billion for investment in NPLs, mezzanine bond and distressed real estate in European countries like Spain, Italy, Germany, Island and the UK.

The fund is expected to generate double-digit returns. So far, Cerberus’ prior European distressed funds created a net internal rate of return of between 10 to 20 percent.

Local investors are showing a growing interest in European NPLs as banks seek to clean up their noncore assets including bad bonds before the implementation of Basel-III norms, a set of standards and practices created to ensure that international banks maintain adequate capital.

By Park Han-na (hnpark@heraldcorp.com)