POBA well-positioned to weather coronavirus crisis

A belief that no tree grows to the sky and a cautious approach to portfolio construction has left the Seoul-based Public Officials Benefit Association relatively well-positioned to fight through this year's ugly environment for the global economy and markets, the fund's CIO said.

While the coronavirus' wrecking-ball path through the global economy was totally unexpected, POBA's team had anticipated that the new year would not match 2019, when "every asset class skyrocketed in price," said Dong Hun Jang, the 14.3 trillion won ($11.7 billion) mutual aid association's chief investment officer.

POBA began the year with a record 10.1% of its portfolio in cash, 55% in alternative assets and only 14% in publicly traded equities, Mr. Jang said. The remaining 20% or so of the portfolio was in structured products, fixed income or loans to the association's participants.

After some recent rebalancing, POBA's equity allocation now comes to about 13% of its portfolio and some of its cash holdings have been funneled to real estate investment trusts, with more likely heading toward listed infrastructure assets, Mr. Jang said. He declined to say how much cash the fund is currently holding.

POBA has ramped up its alternatives allocations over the years but it has done so in a "very conservative" manner, Mr. Jang said.

"Whenever we evaluated a project, we always raised the question, 'What if we have another global financial crisis, like in 2008,'" he said. The common question was whether the investment would prove resilient, he added.

The mutual aid association's equity investment in the operator of the London Orbital Motorway, or M25, made about three years ago, is a case in point, Mr. Jang said. The amount of the investment could not immediately be learned.

POBA didn't want to be "exposed to market cycles, economic conditions or usage issues," and the terms of its M25 investment reflect that, Mr. Jang said. As long as the road is available for usage, the public authorities will pay for it — regardless of how much traffic there is, he said.

Likewise, POBA has boosted its investments in logistics facilities in markets such as Europe and Japan — assets that should prove resilient on the back of growing demand for online shopping, Mr. Jang said.

POBA has not moved to revalue its alternative exposures to reflect the economic and market mayhem of the past six weeks or so, as some Australian super funds have done.

Unlike those Australian funds, which as part of a recent government stimulus package are allowing participants facing economic hardship to draw down their retirement savings, POBA's participants will "keep their money in our accounts until they retire," Mr. Jang said. Those illiquid exposures will be revalued at the end of the year, he said.