NPS begins process to venture into multi-asset investments

South Korea’s National Pension Service (NPS) has begun a process to initiate multi-asset investment as part of an effort to create higher returns from its expanded alternative asset classes.

In a regulatory filing on Feb. 24, the state-run pension fund posted its criteria for the selection of multi-asset management firms, to which it will entrust money for investment.

Under the guidelines, an asset manager must currently run a related fund worth at least $500 million to be entitled to the management of the pension fund’s multi-asset investments.

The NPS said no specific decisions have been made yet on the exact size of the investments and the number of asset managers to be chosen.

A multi-asset fund, also known as a multiple-asset class, invests across various asset classes from equities, fixed-income and currencies to real estate to reduce volatility in the fund’s portfolio. The weights and types of classes vary according to the asset manager in charge.

In 2019, the NPS changed its in-house rules to expand its investment scope and allocate up to 2.4% of its total assets to investments in private debt and multi-asset funds to diversify its strategy and improve returns.

But a lack of in-house investment staff has been hindering its ambitions to venture into multi-asset classes.

Around 260 employees, shy of its target number of 288, currently run the world's third-largest pension scheme's assets worth $700 billion.

Across all assets, the national pension fund reported a provisional return rate of 9.7% in 2020, marking the second time for the South Korean pension fund to log near 10% returns two years in a row.

Write to Jung-hwan Hwang at jung@hankyung.com
In-Soo Nam edited this article.