South Korean Pension, Following Canadian and European Trends, Plans Private Equity Teams

(January 4, 2011) – Following the lead of other large institution investors in Europe and Canada, South Korea’s National Pension Service (NPS) is planning to establish multiple private equity funds.

Although these funds will be established as joint ventures with local conglomerates – as opposed to the entirely internal private equity teams seen at the likes of the Ontario Teachers’ Pension Plan, Quebec’s Caisse de Depot, and Denmark’s ATP – the move toward private equity control signals a further evolution of this large institutional player. In total, four separate funds are planned, with the partners being SK Group, GS Group, KT Corporation – a telecommunications firm – and Samsung C&T Corporation, according to The Wall Street Journal. Before the joint ventures are executed, however, the NPS committee, run by the country’s welfare ministry, must approve the new businesses.

According to The Journal, the move is meant to further diversify the fund’s bond-heavy US$267.1 billion portfolio, the world’s fourth largest pension pool. Currently, almost 70% of the fund’s assets are in domestic bonds, with a large portion of the remaining assets also invested locally; by 2015, the fund hopes to increase its overseas exposure to 20%.

Besides the planned private equity joint ventures, the NPS has recently pushed its portfolio in infrastructure and real estate, a trend also mirrored by other large institutional investors.

For a profile of Canada’s pension funds – and, specifically, the internal private equity and hedge fund teams that they have established – click here.