NPS falling short of alternative investment goals The Korean pension fund needs to invest faster to meet its 12.6 percent target allocation
Translated by Ryu Ho-joung 공개 2020-03-25 08:00:05
이 기사는 2020년 03월 25일 08:00 thebell 에 표출된 기사입니다.
Alternative investment by South Korea’s National Pension Service (NPS) has increased by more than three trillion won in the six months to June 2019, though this was not enough to meet the pension fund’s target allocation.The public pension fund’s investment in financial assets has grown by 56.9 trillion won to 695.7 trillion won during the six months ended June 2019, according to the latest report from the National Pension Research Institute.
Gains on valuation of investments, worth 39 trillion won, accounted for the largest portion of the increase, followed by new investments worth 11 trillion won and realized gains worth seven trillion won. Overall, the share of investments in equities and overseas bonds has risen, while the share of investments in domestic bonds and alternative assets has fallen.
NPS’ investment in alternative assets stood at 80.3 trillion won as of June 2019, up 3.7 trillion won compared to six months earlier. Investments in all types of alternative assets, including private equity, real estate and infrastructure, have increased during the first half of last year. Specifically, investments in overseas real estate, private equity and infrastructure sat at 23 trillion won, 16.5 trillion won and 14.9 trillion won, respectively, while domestic infrastructure and private equity represented investments of 8.1 trillion won and 7.8 trillion won.
Still, the overall allocation to alternatives remains below the pension fund’s target.
NPS has a 12.6 percent target allocation to alternatives, but the actual allocation to alternative assets was 11.5 percent as of the end of June 2019, 1.1 percentage points lower than the desired level. That is a result that contrasts with the pension fund’s mid-to-long-term plan to enhance investment returns by increasing its allocation to equities and alternatives and reducing allocation to domestic bonds at the same time.
The report attributed a slow growth of the pension fund’s investments in alternatives to two factors: an increase in exits from older investments and a slow rate of deployment into new investments. Especially, the latter was largely due to growing competition in alternative investment markets as well as inefficiency in the pension fund’s internal process, the report pointed out.
The NPS investment committee last year approved measures to improve its internal structure and process, including dividing its alternative investment division into smaller teams by asset type and adopting a fast-track route for alternative investments. “We need to wait and see whether these efforts will lead to increased allocation to alternative assets,” the report said.
In the first six months of last year, alternative assets produced returns of 4.24 percent, with returns on domestic and overseas alternative investments at 1.28 percent and 5.58 percent, respectively. By asset type, overseas hedge funds produced the highest returns at 8.19 percent, followed by overseas private equity at 6.11 percent, overseas infrastructure at 5.88 percent, overseas real estate at 4.86 percent, domestic infrastructure at 2.85 percent and domestic real estate at 1.84 percent.
However, these figures have not been revalued to fair value, which is done once a year around September, the report explained. Indeed, according to the latest data from the NPS, returns on alternative investments sat at 9.62 percent as of the end of December 2019.
For the six months to June 2019, the NPS has been cash flow negative on its alternative investments largely due to increased contributions to overseas alternatives. Distributions from the pension fund’s alternative managers for the next five years are expected to amount to more than 70 trillion won, with the portion of overseas alternatives expected to account for nearly 80 percent of the amount.
As of the end of December 2019, the NPS had about 736 trillion won assets under management, of which alternative investment accounted for 11.5 percent, or about 84 trillion won.
(By reporter Han Hee-yeon)
< 저작권자 ⓒ 자본시장 미디어 'thebell', 무단 전재, 재배포 및 AI학습 이용 금지 >
관련기사
best clicks
최신뉴스 in 전체기사
-
- '52주 최저가 근접' 티에스아이, 풋옵션 물량 부담
- 비브스튜디오스, 광주 백운광장 '인터렉티브 콘텐츠'
- 분쟁에도 끄떡없는 한미약품, 두자릿수 영업이익률 저력
- [K-바이오 클러스터 기행|대전]K-바이오 기원 LG사단, 20년 지나도 굳건한 네트워크
- 한독, PNH 매출 공백 채울 '한수' 엠파벨리주 허가
- 하나제약, 제네릭 진통제 출시 포기…성장전략 '삐끗'
- [스튜어드십코드 모니터]쿼드운용, 행동주의 펀드 화력 '집중'
- 파워넷, 모로코에 ESS LFP배터리팩 공급
- [바이어 人사이드]30년 쌓은 델리 코너 노하우, 경쟁력 강화 핵심 '열쇠'
- 비만시장 뛰어든 HK이노엔, '케이캡' 성공공식 따른다