NPS mandates Russell to invest $1 bn in listed real estate

The National Pension Service has mandated Russell Investments to invest $1 billion in listed real estate companies or real estate investment trusts (REITs), betting on a public real estate market recovery from the pandemic-related downturn, according to the US asset manager.

“The new mandate is designed to take advantage of tactical opportunities with the majority allocated (for) periods following market downturns,” Russell said in a statement released earlier this week. 

The Seattle-based investment firm expects public real estate will attract more cash flow next year in an extended low interest era, given high US equity valuations and ample liquidity.

“Not only does this new mandate allow us to efficiently capture potential price discrepancies between public and private real estate markets going forward but it will also act as an excellent portfolio diversifier, and help improve the overall portfolio risk-adjusted return,” Scott Kim, head of NPS' real estate investment division, said in the statement.

The $1 billion investment through Russell will further expand NPS’ listed real estate investment capability to capitalize on public real estate market opportunities and complement the private real estate portfolio, he added.

“Successful distribution of COVID-19 vaccines should enable demand for public real estate to recover, particularly for the most impacted property sectors, such as retail, office and lodging,” said Bruce Eidelson, a director and senior portfolio manager of Russell Investments. “We expect the ever-broadening intra-sector performance dispersion will create a better active management environment, which can produce a significant return over the benchmark.”

With $300 billion in assets under management, Russell runs the listed Global Real Estate Securities Fund. For the NPS mandate, it will open a separately managed account. 

To beef up overseas investments to 55% of its total assets by 2025, the NPS will deploy 160 employees to its overseas offices in New York, London and Singapore over the next four years and empower them to make direct investment decisions, it said in an announcement on Wednesday. In the announcement, NPS stressed its efforts to improve professional ethics as a pension scheme overseeing over 800 trillion won ($725 billion).

Write to Jung-hwan Hwang at jung@hankyung.com
Yeonhee Kim edited this article.