[THE INVESTOR] South Korea’s large investors are targeting loans for global merger and acquisition deals for stable returns.

Korean institutional investors including Korean Teachers’ Credit Union and Government Employees Pension Service have committed a total of 870 billion won (US$788.47 million) for private debt funds this year. 

Private debt fund refers to a fund that is raised from a small group of institutions and wealthy individuals and then invested into companies that pursue M&A deals by purchasing corporate bonds or business loans. 

“Due to prolonged low interest rates, the private debt fund market has started to attract investors’ attention here. The demand for the PDF will grow as they seek to diversify their investment portfolio,” an official at an institution said.

Korea Post, which oversees 110 trillion won, plans to pick three asset managers in October to invest up to 300 billion won in PDFs targeting returns of 6 percent.

Public Officials Benefit Association also has similar plans to target mezzanine loans by investing 110 billion won.

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