NPS’ global investing bolsters alternatives returns

South Korea’s National Pension Service has reaped the benefits of diversifying its investing to more foreign alternatives.

In its annual report the world’s third-largest pension fund revealed that for fiscal year 2016 its rate of return was 5.74 percent for domestic alternatives and 12.34 percent for global alternatives.

The allocation to alternatives has also increased by 9 trillion won ($7.98 billion; €7.13 billion) year-on-year to 63.7 trillion won for fiscal 2016. The alternatives allocation now sits at 11.4 percent.

International alternative assets now account for 65.5 percent of aggregate alternative assets and the investment in foreign alternatives rose by 9.4 trillion won year-on-year to 41.7 trillion won. By comparison, the investment in domestic alternatives fell by 400 billion won year-on-year to 21.9 trillion won.

The 558 trillion won pension fund also saw growth in its externally managed assets. As of end December 2016, its indirectly managed assets stood at 208.6 trillion won, up from 21.8 trillion won at the end of 2015. Of that amount, 56.5 trillion won was entrusted to alternative investment managers.

Infrastructure vehicles recently backed by NPS include Macquarie European Infrastructure Fund 5, closed on €4 billion last September. The pension is also an investor in EQT Infrastructure Fund II and F2i II.