The chief investment officer at Korea’s National Pension Service, Hong Wansun, has urged domestic and international asset managers to support the institution with its expansion at a critical juncture in its history.
Delivering the opening address at AsianInvestor’s ninth annual Korea Institutional Investment Forum in Seoul yesterday, Hong noted that while it had taken NPS 27 years to reach W500 trillion ($418 billion) in AUM this year, he forecast it would take just seven more years to double that to W1,000 trillion.
As such, he said NPS needed to be far-sighted in its approach, stressing the need for the public pension fund to continue diversifying its investments, and saying that it would need the help of experts to achieve its goals.
Hong noted that next month he expected NPS to choose up to four global hedge funds to invest in the asset class for the first time, adding the fund was also set to open an office in Singapore next week to serve as a springboard for pan-Asia investment. Further, he added it would be hiring its first non-Korean staff to be based in London and New York in early December.
To aid in its expansion plan, Hong stressed that NPS needed support and cooperation from the external asset management community, saying it was eager to benefit from knowledge-sharing through partnerships.
“We are at a very critical juncture, a so-called golden time,” he told the packed auditorium of institutional investors, asset managers and service providers at the Westin Chosun hotel.
He said now was the time for NPS to prepare for a future that by 2030 would see it required to pay out more in insurance premiums than it received from the public.
“So we have to be able to be far-sighted,” he explained. “We will continue to grow in size and our management capabilities must be expanded and upgraded and our systems improved.”
New asset classes
Hong observed that 2015 had been a landmark year for NPS in terms of it reaching W500 trillion in AUM, with the fund having been established in 1988. He noted it had not even set up an investment management department until 1999, at which time its AUM was W47 trillion.
He highlighted how NPS had pursued an increasingly diverse range of investment opportunities, having become cautious about the impact of its investments in the local market and expanded into overseas equities and alternatives as part of a portfolio rebalancing away from domestic fixed income.
“We have created a more diverse asset class composition, investing into emerging Asian countries and redoubling our efforts to identify new and high quality investment opportunities,” Hong said, listing private equity, real estate, aeroplane rental and the health care sector.
While he conceded NPS had yet to invest into hedge funds, he told the forum that by next month it should have chosen three to four global hedge funds to invest into and said it would likely have started investing before this December.
Among its current investment targets he listed infrastructure, global real estate investment trusts (Reits), landmark buildings and opportunities in emerging Europe. He added that NPS had also invested into a global venture capital fund based in Silicon Valley, whose management had recently visited Seoul.
As further evidence of its diversification agenda, he pointed out that NPS would be opening an office in Singapore next week, to add to its overseas bases in New York and London.
“Opening an office in Singapore will serve as a springboard for NPS to invest pan-Asia, including Australia as well as the Middle East and Africa,” he said.
Hong added that NPS was set to hire two local specialists based in London and New York to start at the beginning of December – the first non-Koreans the pension fund will have hired.
In an exhortation to asset managers in the audience, Hong added: “We need your support and cooperation. You are competitors in the markets, but you are also participants in the same markets. You can compete, but you can also be partners for mutually beneficial growth and cooperation.”
In particular he said NPS was focused on identifying promising companies to invest in at home and abroad, pointing to China and global private markets in particular.
“We have established a mid- to long-term investment plan for overseas,” Hong said. “We have utilised domestic asset managers and pursued cooperation with a diverse range of overseas GPs [general partners]. There are a lot of collaborative investment opportunities.”
He closed his address by underlining the importance of such partnerships and of knowledge-sharing. “NPS will lend a serious ear to the opinions of experts to make investment in Korea, Asia and the rest of the world,” he said. “Please provide us with good feedback and advice.”