NPS reveals interest in opening Hong Kong office

Korea’s $340 billion National Pension Service (NPS) will look to open an office in Hong Kong and Shanghai in the future, although for now is focused on further establishing its other overseas bases.

A spokesman for the world’s fourth largest pension fund had initially told AsianInvestor it was budgeting for a Hong Kong office in its 2013 plans, but that has subsequently been revised.

"We think we need to stabilise our existing overseas offices [in New York and London] rather than focus on opening a new one," the spokesman confirms. "We will consider opening an office in Hong Kong as we diversify our portfolio, but this will not be in the near term. We have no concrete plan on this right now."

The NPS uses overseas offices for research, information gathering and marketing, as well as expanding its universe of financial expertise. The plan eventually will be to add investment staff and portfolio managers as well.

But the NPS spokesman explains that the pension fund wants to ensure its other offshore bases are fully established before taking further action to accelerate its overseas presences.

NPS opened an office in London last year and also has an overseas base in New York. Any plan to set up in Shanghai would only happen once a Hong Kong base is established, AsianInvestor understands.

The fund will be seeking additional QFII quota, the spokesman adds, having been awarded $100 million in its first batch in March last year. This sum has been fully allocated in China’s A-share market across both Shanghai and Shenzhen.

At the end of last year NPS started to invest in emerging market fixed income for the first time, into countries including Indonesia, Thailand, the Philippines, India and Taiwan, as well as Mexico.

It is striving to diversify out of fixed income in the low-yielding environment, and into equities, alternatives and overseas assets.

It has instituted a mid-term asset allocation plan, and decreased the weighting of fixed income in its portfolio from 90% in 2003 to 66% in 2012. Over the same period, its equities exposure has risen from 9.1% to 25.4%, and alternatives from 0.2% to 7.8%.

On the alternatives side it now has around W30 trillion ($27 billion) invested in infrastructure, real estate, venture capital and private equity, of which 55% (a declining share) is domestic and 45% (increasing) overseas.

“Last year we tried to invest in global hedge funds, but we couldn’t find the right opportunity,” the spokesman notes. “But we are still looking to invest.”

NPS saw returns of 6.16% last year to November, with 7.33% in annualised returns for the last three years, driven by diversification into equities, alternatives and overseas investments.

As at the end of October last year it had W384 trillion in assets under management, and anticipates that tripling by 2020.

With 160 staff as of last year, it says it is aiming to add 35 experts this year, which would be its biggest ever 12-month hiring spree. This includes portfolio managers and risk management staff.

NPS was established in 1998 to pay pension benefits and now has 23 million members. Its chairman, Jun Kwang-won, resigned in February before the administration of new president Park Geun-hye took office on February 25.