Korea’s NPS ups alternatives exposure to 9.9%

Of the KRW46.7 trillion in alternatives, KRW22.2 trillion was deployed domestically and KRW24.5 trillion globally - the first time the latter has accounted for the majority. Alternatives as a whole have delivered 8.34% on a three-year basis. Global infrastructure is the best performer on 10.48% followed by global private equity on 9.92%.

Within the global portfolio, KRW7.35 trillion was in private equity funds, up from KRW5.08 trillion in 2013. Managers include Asia-based GPs Baring Private Equity Asia and CDH Investments, as well as global names such as Apollo Global Management, Bain Capital, The Blackstone Group, The Carlyle Group, CVC Capital Partners, KKR, Silver Lake and TPG Capital.

NPS had a further KRW4.93 trillion in infrastructure and KRW12.2 trillion in real estate at the end of 2014.

The domestic alternatives portfolio was split between infrastructure (KRW8.81 trillion), real estate (KRW6.1 trillion) and venture, corporate restructuring and private equity (KRW7.28 trillion). GP relationships on the private equity side include MBK Partners, IMM Private Equity, Vogo Investment, STIC Investment, Unison Capital, SoftBank Ventures, Skylake Investment and Q Capital Partners.

NPS started its domestic alternative investment program in 2002 and first went offshore in 2005. The following year its alternative investment committee was set up and the fund's allocation to the asset class was just 1.1%. By 2010, 5.8% of NPS' assets were deployed in alternatives. The target allocation for 2014 was 11.3%, up from 10.6% the previous year.

The fund is expected to exceed KRW500 trillion this year, KRW847 trillion in 2020 and KRW2,561 trillion in 2043, according to its 2014 annual report. Assuming no change in the percentage allocation, the KRW46.7 trillion committed to alternatives at the end of 2014 would be more than KRW253 trillion by 2043.

NPS delivered a 5.25% return on its entire portfolio in 2014 and 6.21% since inception in 1988. In addition to alternatives, it has a 20% allocation to domestic equities, 10.5% to global equities, 54.2% domestic fixed income and 4% to global fixed income.

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• Topics
• LPs
• North Asia
• Performance
• LPs
• South Korea
• National Pension Service (Korea)
• Performance