The chairman of Korea’s Government Employees Pension Service (GEPS) has quit and its chief investment officer is also set to stand down this month, AsianInvestor can confirm.
It comes amid weak performance, with GEPS having returned 2.4% last year to September and 3.3% in 2012. Its performance was the worst among Korea’s three major pension funds, which also include the National Pension Service (NPS) and Korea Teachers Pension Fund (KTPF).
Domestic media reported that Ahn Yang-Ho had stepped down as chairman months ahead of the expiry of his official three-year term, which runs to September this year. He had taken office in September 2011. When AsianInvestor approached GEPS, a spokesperson confirmed the report. Media reports had claimed that Ahn’s departure was due to GEPS’ weak asset management performance.
It has also been confirmed that CIO Yoo Seung-Rok will stand down this month and will not seek a second term. His term was due to expire early this month. It means that GEPS will be seeking a new chairman and CIO concurrently.
Analysts note that Korea’s three pension funds are all too dependent on domestic fixed income and retain a low allocation to international assets. GEPS has pledged to increase its global investments from 4% currently to 11% by the end of 2014.
GEPS’ has fallen short in meeting its liabilities and required government subsidies to remain operational.
Late last year, AsianInvestor reported that GEPS was planning to boost its global private equity exposure and make its first step into offshore hedge funds.
With $4.75 billion in investable assets, GEPS had yet to invest in hedge funds globally. Its international PE exposure stood at 2% of its alternatives portfolio near the end of last year. It was aiming to increase the ratio to 6.8% in 2014 and 7.8% next year.
But with a 16% allocation to alternatives, GEPS’ ratio is higher than NPS’s 10%, with geographical diversification seen as key to mitigating risk.
KTPF posted a 2.7% return in the year last September (down from 6.8% in 2012). It was planning to near-treble global exposure from 6% to 16% by the end of 2017.
NPS, meanwhile, returned 2.8% in the same period. However, based on the past 10 years (end-2012), NPS has returned 6.5%, behind only the California Public Employees Retirement Scheme and ABP of the Netherlands among big state pensions.
It has been reported that NPS plans to increase its global equity investment from 9.3% to 10.5% of its assets this year, and to double the number of global investment staff it has within three years. It may resort to hiring foreign nationals.
There has been a major trend in recent years for Korean – and other Asian – institutional investors to raise their alternatives allocation.
Fellow Korean entities, such as Korea Investment Corpoation, Korea Teachers Pension Fund and the National Pension Service, have been making similar moves. The same is true of institutions such as Malaysia's Employees Provident Fund and Thailand's GPF and Social Security Office.