Korea’s pension fund NPS rules out investing in MBK’s hostile M&A deals

South Korea’s National Pension Service (NPS) said on Monday it will not participate in investments related to hostile mergers and acquisitions led by MBK Partners Ltd., a Seoul-based private equity firm (PEF) recently involved in a series of controversial deals.

The state-run pension fund, the country’s largest institutional investor, said in a statement that its Fund Management headquarters’ pledged investment in MBK’s sixth blind fund, signed in February, explicitly excludes involvement in hostile takeovers.

The pension fund said it is also considering incorporating similar provisions into future contracts with PEFs in which it invests.

The NPS’ rare clarification follows concerns over its backing of MBK’s latest fund, particularly in light of the controversy surrounding MBK’s handling of Homeplus Co., a Korean retailer that recently filed for court receivership.

The development has sparked criticism over MBK’s business practices for the companies it invested in, including its wholly owned Homeplus.

With the latest statement, the NPS has made it clear that it will not comply with any future capital calls from MBK Partners if the funds are directed towards disputed investments, such as its recent involvement in Korea Zinc Inc.

RESPONSIBLE INVESTMENT

Last July, the NPS selected MBK Partners as one of four domestic fund managers to which it entrusts money for the operation of the pension fund.

Once selected, fund managers typically sign formal investment agreements with the NPS within two to three months.

Following the selection of MBK as one of the four, however, concerns were raised about the PEF’s investment strategies, particularly regarding its hostile takeover attempt at Korea Zinc.

“Some aspects of MBK’s investment strategy were deemed misaligned with the NPS’ investment principles,” said an NPS official.

Analysts said the move underscores the NPS’ growing emphasis on responsible investment practices, as it manages one of the world’s largest pension funds, valued at 1,213 trillion won, or $830.3 billion, at the end of 2024.

Write to Gyeong-Jin Min at min@hankyung.com

In-Soo Nam edited this article.