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ASK 2021

NPS makes new commitments worth $17 bn in private sector every year

NPS concerned about corporates' margin pressures and high market multiples which liquidity reduction may impact

Oct 28, 2021 (Gmt+09:00)

Choe Hyung Don, head of the pritave equity and venture capital investment division of NPS, talks in ASK 2021
Choe Hyung Don, head of the pritave equity and venture capital investment division of NPS, talks in ASK 2021
South Korea's National Pension Service (NPS) plans to keep increasing private equity investment for mid- to-long term asset allocation, Choe Hyung Don, head of the private equity and venture capital investment division of NPS, said at a LP panel session during ASK 2021 on Wednesday. The public pension fund has to make new commitments worth 20 trillion won ($17.1 billion) and 70 to 80 new investments in the private sector every year, he added.

“As a long-term investor to increase alternative assets, we have used various strategies such as simplified investment procedures, particularly for small-sized investments less than $100 million, investment expansion and strategic co-investment partnerships with core general partners (GPs) as well as an increase in overseas investment professionals,” he said. He added that NPS has 37 employees in the private investment sector and will expand the workforce.

Choe also highlighted two concerns over next year's investment activities. “On co-investment, NPS is cautious concerning corporates’ margin pressures impacted by wage increases, raw material price increases, supply chain confusion and other inflation factors. Also, we are concerned that high market multiples driven by excessive expectations on tech companies’ growth may be affected by liquidity reduction policies.”

NPS actively invested in and recovered investment in growth equity, venture capital (VC) and the technology sector this year, Choe said. This was owing to the boom in the initial public offering (IPO) market and increased investment in continuation funds and GP-led secondaries," he added.

NPS' recovery amount may be greater than the investment size this year, and the pension fund revises its investment pacing model every year as its portfolio is in a mature stage and investment recouped significantly increases, Choe added.

NPS is one of the largest global pension funds. In its assets under management (AUM) amount to 920 trillion won, alternative assets make up 11%. Private debt and private equity account for a combined 3.7%, while aiming for more than a 10% internal rate of return.

By Jihyun Kim
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