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Pension funds

NPS to speed up under $100 mn alternative investments

Working-level officials are now authorized to endorse under $100 mn alternatives and co-investments

By Jul 14, 2021 (Gmt+09:00)

NPS to speed up under 0 mn alternative investments

The National Pension Service (NPS) has revised internal regulations to authorize its working-level officials to proceed with deals worth less than $100 million apiece, a move the South Korean pension fund expects to boost its small-size alternative investments by $1 billion annually.

On top of the increased ticket size subject to its review from the previous $50 million, the pension scheme's alternative investment subcommittee is now responsible for co-investments with NPS-backed funds and a commitment of up to $100 million to an offshoot of the project where the NPS has already participated. Examples of the offshoots include the redevelopment or renovation of the facilities in which the NPS has invested, or acquisition of nearby land or annex buildings.  

The NPS disclosed the internal regulation revisions on July 12.

The subcommittee composed of its working-level officials, or team heads, is also in charge of follow-on equity investments in the assets or projects where the world's No. 3 pension fund has already been involved.

The decision to empower the NPS's team heads to push ahead with deals each worth less than $100 million is aimed at speeding up its investment execution. Assets under management at the pension fund are forecast to top $1 trillion in coming years versus $775 billion at the end of last year. 

Under the revised internal rules, the pension scheme expects its alternative investments of less than $100 million to increase by an additional 15 to 20 deals for a combined 1 trillion to 1.3 trillion won ($870 million-$1.1 billion) per year. 

Its higher decision-making body, or the alternative investment committee chaired by Chief Investment Officer Ahn Hyo-joon, will concentrate on bigger-size investment opportunities, according to the NPS. 

NPS' highest decision-making body, Investment Management Committee, holds a regular meeting on July 2, chaired by Welfare Minister Kwon Deok-cheol
NPS' highest decision-making body, Investment Management Committee, holds a regular meeting on July 2, chaired by Welfare Minister Kwon Deok-cheol

Established in May 2019, the subcommittee to review alternative investments has been in charge of deals worth less than $50 million. It was expected to shorten the NPS' investment decision-making process to less than four weeks from the previous six to eight weeks, with the CIO-chaired committee focusing on bigger investments.

Since its inception, however, it has received only 27 investment proposals, of which the NPS carried out seven investments for a combined 283.2 billion won as of the end of last year. That means most of the NPS alternative investments had required endorsement by its CIO. 

During the period, the NPS let go of 25 co-investment proposals worth 1.4 trillion won in aggregate. Their deal size was too big for the subcommittee to oversee and thus handed over to the higher reviewing committee, which eventually pushed them aside due to time constraints.

Further, real estate and infrastructure were not included in the investments authorized by the subcommittee because of their ticket size that exceeds 300 billion won for the NPS on average.

Write to Jung-hwan Hwang at jung@hankyung.com

Yeonhee Kim edited this article.

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