31 May 2018
South Korea’s National Pension Service (NPS) plans to boost allocations to overseas assets to 40% in four years from the current 29% by strengthening the functions of its foreign offices, according to a Korean business daily, citing the pension fund’s top executive.
The NPS, the world’s third largest pension fund, has also increased its allocation to alternative investments to 10.7% of total assets under management (AUM) as of February 2018 from 5.8% in 2010, mainly through mandate outsourcing, The Korea Economic Daily says in a report on May 29.
The report is based on NPS Chairman and Chief Executive Officer Sung-joo Kim’s remarks in a keynote address at an investment conference on May 29.
It says the pension fund is targeting its AUM to grow to 1,000 trillion won (US$924.5 billion) by the end of 2022 from 624 trillion won as of February 2018.
A spokesperson for NPS did not immediately respond to questions from Asia Asset Management on the reported asset allocation moves, which also indicates the fund has exceeded its goal for investments in alternative assets.
According to the news report, Mr. Kim told the conference that “as part of an effort to achieve our goal of 40% for global investments and 10% for alternative investment and expanding direct investment in global markets, we focus on strengthening the function of our overseas offices”.
NPS opened offices in New York, London and Singapore between 2011 and 2015. Last year, it empowered the offices to submit their investment proposals directly to the fund’s committee in order to speed up cross-border investments.
On alternative investments, the news report quoted Mr. Kim as saying that the pension fund “will make the most of the overseas offices’ local advantages and continuously strengthen their function to make local investments, including expanding project-based co-investments”.
NPS is expanding its workforce to accommodate the diversification overseas and into alternatives. It posted announcements in April seeking investment professionals in private equity, infrastructure, and real estate for the London office.
According to The Korea Economic Daily, Hyung Do Choe, head of NPS’s global private equity division, said at the conference that the London office is leading the fund’s investment in distressed and special situation strategies.
More Korean institutional investors are launching offshore branches as a means to raise their overseas exposure. The country’s sovereign wealth fund, Korea Investment Corporation, opened its first Asian office in Singapore last September to tap investment opportunities in East Asia.