South Korea has long been recognized as a powerhouse of economic growth and technological advancement. However, South Korea has also become one of the most active and important investor markets for the alternative investment space, as both public and private investors are looking for ways to increase returns while benefiting from portfolio diversification. Below highlights five of the major public institutional investors in South Korea. (Who will also be in attendance at The DM Alternatives Conference (DMAC) 2017 in South Korea!)
NPS (National Pension Service)
Assets Under Management: USD $430 Billion
Officially established in 1987, NPS (short for National Pension Service of Korea) is South Korea’s pension fund and is the 3rd largest in the world. NPS currently has approximately $430 Billion in assets and was historically, as with many other public funds, focused heavily on domestic investments. With several measures that were put in place and implemented by South Korea, NPS has quickly become one of the foremost sovereign wealth funds in the world. NPS’s recent mandate to increase overseas exposure to 40% by 2020 has also ramped up their alternative investment hiring efforts in Korea, as well as abroad. As the pension fund continues to search for quality overseas managers quite actively, NPS should be viewed as one of the primary global investors for the alternative investment market for years to come.
KIC (Korea Investment Corporation)
Assets Under Management: USD $91.8 Billion (as of end of 2015)
KIC (Korea Investment Corporation) was established in 2005 in order to further facilitate overseas investments of excess capital of foreign reserves, pension funds and public funds. The work augments the functions of other public investment with a heavy focus on overseas allocation to generate returns on behalf of South Korea.
*KIC 2015 Annual Report
Assets Under Management: USD $96.3 Billion
Korea Post is a government agency affiliated with the Ministry of Knowledge Economy. Their financial services consist of Postal Savings and Postal Insurance programs. They invest primarily in government bonds and other safe assets, but also pursue various opportunities coming from market anomalies in credit, stocks and alternative assets to achieve alpha returns. Korea post is set to invest its first $200 Million into individual foreign hedge funds and award another fund-of-funds mandate. They will make an additional investment of $100 Million this year, with the size of assets under management increasing to 750 billion won by the year’s end and they will also increase its hedge fund investment by 50 percent this year. Korea Post currently runs total investment assets of 115 trillion won including both savings and investment bureaus.
Korea Teachers Pension
Assets Under Management: USD $12.3 Billion (As of End-2016)
Korea Teachers Pension was established to manage and operate the pension system efficiently that had been prepared to improve the stable economic life and welfare of personnel and their family who have worked in the private school. Its overseas alternative investments returned 8.45% last year, outperforming the overall return of 4.0% for the fund, according to Yonhap Infomax. The 2016 average return edged up from 3.7% in 2015. The pension fund has been aggressively diversifying alternative investments into an office building in Australia and a US warehouse portfolio fund, as well as value-added and opportunistic real estate funds in the US and Europe. In 2016, it invested around $500 million in blind-pool funds ranging from real estate, corporate mezzanine debt and infrastructure to secondary and value-added funds. Korea Teachers Pension has also committed US$50m (€44.6m) to LaSalle Investment Management’s latest US value-add real estate fund.
The Military Mutual Aid Association
Assets Under Management: USD $8 Billion
Established in 1984, the MMAA’s investment pool, responsible for soldiers’ welfare benefits, grew to 9.4 trillion won in 2015 from 954.4 billion won in 1995. The MMAA is now gradually diverting its investment from real estate to new investments in infrastructure and overseas markets to secure more profits. In overseas markets, MMAA will mainly invest in private debts, private equities and tangible assets such as air carriers and real estate. Alternative investments represent 70% of the MMAA’s total assets which are projected to rise to 10.4 trillion won by 2017, from this year’s estimated 9.8 trillion won. This year, MMAA will commit $30 million in aggregate to two US venture capital funds of funds in its first investment in a global venture capital fund, targeting annual returns of between 15% and 20%.