Korean insurer commits to Hancock fund

The $40m pledge is thought to be the first commitment to a global timber and farmland vehicle by South Korean investors.

 

The Hancock Natural Resources Group has secured a $40 million commitment to an open-ended timberland and farmland fund from two units of South Korean conglomerate the Dongbu Group, according to a local report.

It took Dongbu Insurance and Dongbu Life Insurance 10 months to secure necessary regulatory approval for the investment, which was carried out through a domestic vehicle each unit contributed to, the Korea Economic Daily said.

The report noted that the seven-year fund Dongbu invested in “guarantees annual returns of at least 4 percent” and potentially  above 20 percent through a strategy focused on timber and farmland investments. However, a spokesman for Hancock told Agri Investor no product the firm manages offers investment guarantees per se. He declined to comment further on the commitment.

A manager with a long history in the industry told Agri Investor that while they have been aware of Japanese investors investigating US-managed ag and timber funds for years, the commitment to Hancock was the first they had heard of from South Korea.

“It is a true emerging market, I think, for farmland. I am not aware of anyone who has ever done business or received an allocation there before,” the manager said.

Changing chaebols

Dongbu Group is one of a group of large industrial conglomerates, or chaebols, which have long had enormous influence over economic activity in South Korea.

In a research note published this month, KKR member and head of global macro and asset allocation Henry McVey highlighted the changing behavior of chaebols as part of a wider trend of greater structural corporate efficiency in Asia.

The report framed the resulting opportunity for private equity largely in terms of chaebol divestitures of non-core units, listing six such sales by Dongbu since 2014 alone, but also mentioned how their outbound investment strategies have changed of late.

“Interestingly, today we see a shift in the chaebols’ strategy, driven by both regulatory change and then the need for growth,” McVey wrote. “The other emerging opportunity with South Korea, similar to what we are seeing in Japan, is an increasing desire for growth outside of South Korea.”