NPS doubles foreign alternatives bets over 4 years A Korean public pension fund aims to raise its overall alternatives allocation to 13% in 2020

Translated by Ryu Ho-joung 공개 2020-01-20 08:00:00

이 기사는 2020년 01월 20일 08:00 더벨 유료페이지에 표출된 기사입니다.

South Korea’s National Pension Service (NPS) is doubling down on its alternatives bets in the overseas markets.

The world third largest pension fund has 712.1 trillion won ($614 billion) in total assets under management as of the end of October 2019, among which foreign alternative assets account for 7.9 percent (56.2 trillion won). This represents more than double the share of domestic alternative assets at 3.5 percent (24.6 trillion won).

The public pension fund’s bets on overseas alternatives are on the rise, surpassing the 24 trillion won mark and the investment in domestic alternatives (22.2 trillion won) in 2014. Over the period from 2015 to 2018, the fund’s assets invested in overseas alternatives saw a strong increase from 32.3 trillion won ($27.9 billion) to 52.2 trillion won ($45.1 billion), reflecting an average annual growth of more than 17 percent.

Among alternative asset classes, real estate accounted for almost 40 percent (22.4 trillion won) of the total investment in foreign alternatives as of October last year, followed by private equity (17.3 trillion won) and infrastructure (15.2 trillion won).

The NPS has made bold moves in the global property market. It acquired a 50 percent stake in Frasers Tower in Singapore's Central Business District for $327.4 million last year. Tenants of the office building include global tech giant Microsoft, British company Arup, insurance company Pacific Life and trading company Sumitomo Corporation. In 2018, the pension fund also purchased Goldman Sachs’ European headquarters in London for 1.2 billion pounds, the biggest investment in a single real estate asset in the fund’s history at the time.

In the infrastructure space, the state pension fund invested in Canada’s Coastal GasLink Pipeline Project by committing capital to KKR’s infrastructure fund. The buyout firm acquired a 65 percent equity interest in the Project for $6.6 billion last month. The NPS, in partnership with other investors including global buyout firm Blackstone and Singaporean sovereign wealth fund GIC, also made an investment in U.S. midstream company Tallgrass Energy in a deal worth $2.2 billion.

The NPS has made private equity investments in overseas markets, largely through commitments to fund vehicles run by global managers or co-investments with them. The pension fund has a total of 56 external managers as of September 30, 2019, with many big names of the global private equity industry – such as Carlyle Group, KKR, Blackstone and Bain Capital – included among them.

In 2019, the NPS committed to Blackstone Capital Partners VIII, the U.S buyout firm’s biggest ever private equity fund that closed with $26 billion in committed capital. The pension fund also seeks co-investment opportunities through such investments in funds launched by leading private equity firms.

The NPS plans to boost the share of overall investment in overseas assets, both traditional and alternative, of its total assets under management to 50 percent by 2024, from 34.2 percent as of October 2019. It also plans to raise its domestic and foreign alternatives allocation to 13 percent by the end of 2020.

(By reporter Han Hee-yeon)
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