South Korea's National Pension Corporation, the manager of Korea's $53 billion national pension system, intends to select an investment consultant by the end of this month, to be quickly followed by choosing a trustee, a custodian and investment managers, according to people familiar with NPC.

Four investment consultants are in the race, with Frank Russell and Watson Wyatt tipped to have an edge over William M Mercer and Callan Associates. Frank Russell is a powerful force in Japan, where it has acted for years as the gatekeeper to the Pension Welfare Service Corporation, known as Nenpuku and recently reorganized as the Government Pension Investment Fund – a mandate that opened the door to blue chip Japan's mightiest names. These Japanese institutions have served as role models for South Korea, making Russell's experience of natural interest.

But Russell lacks an on-the-ground presence in Korea, and most likely would serve out of Tokyo, a clumsy arrangement. Watson Wyatt dominates Asia ex-Japan, which gives it an equally impressive claim, and it also has a human resources business in Seoul that it could easily expand for investment consulting work.

Globally William M Mercer is a powerhouse, with commanding market share in North America, but it hasn't been able to translate that into Asia market share. Callan would also make an unlikely winner, as it is strong in America and Britain, but has no operations in Asia or Japan.

The mandate is to invest offshore W200-500 billion ($155 million to $385 million). Until earlier this year, NPC's entire portfolio was invested domestically, mainly in government bonds and time deposits. The portfolio has grown rapidly since NPC was established in 1988 and its executives worry that the domestic market is too small and volatile, and have been pushing for outsourcing some management to third parties. Some academics and brokers believe the government is now allowing this to proceed in order to support the local stock market.

Late in 2000, it outsourced W200 billion on an experimental basis to four domestic investment trust companies, followed by another W600 billion allocated to 12 money managers, including one foreign-owned shop, Franklin Templeton. All these mandates were for domestic equities, and another tranche may be allocated later this year.

But the international piece is a different animal, and requires more help. The NPC had hoped to appoint a consultant in August, but its overworked executives have been harried by delays. Once the consultant is in place, however, decisions on the other pieces can be made more rapidly.

One new twist is the role of trustee will be separated out from the custodian, according to sources in Seoul. This will be a disappointment to global custodians watching the situation, as they are also capable of handling the trustee's grunt work and assuming fiduciary responsibility. Sources speculate the NPC has been looking for ways it can allow a domestic institution to play a role in the international tranche. Korean firms lack the ability to act as a global custodian or investment manager or a consultant, but could handle trustee duties such as recordkeeping and reporting.