PensionsJanuary 11, 2021

National Pension Service of Korea Wagers Offices, Hotels Will Recover

The world’s third largest pension fund placed a $1 billion bet on public global real estate with asset manager Russell Investments.

Reported by Sarah Min

The National Pension Service of Korea (NPS) has awarded a $1 billion global real estate mandate to Russell Investments, betting that offices, hotels, and other public properties will swing back after the world recovers from the pandemic.

The mandate will help the world’s third largest pension fund capitalize on the public real estate markets to complement its private real estate portfolio, as well as improve its risk-adjusted return, and diversify the fund, according to a statement from Scott Kim, head of the real estate investment division at NPS.

It’s the second such mandate awarded to Russell Investments from the South Korean pension fund, which has $710 billion in assets, the firm said last month.

The asset manager expects that public real estate is expected to attract more cash flow, thanks to continually frothy markets and low interest rates, particularly as the outlook for the asset class has altered with the COVID-19 vaccine. Demand for public real estate is expected to come back after the distribution of the vaccine this year.

“Successful distribution of COVID-19 vaccines should enable demand for public real estate to recover, particularly for the most impacted property sectors, such as retail, office, and lodging,” Bruce Eidelson, director and senior equity portfolio manager at Russell Investments, said in a statement.

“We expect the ever-broadening intra-sector performance dispersion will create a better active management environment which can produce significant return over the benchmark,” he added.

The overseas mandate also comes as NPS has signaled that it will increase its allocation into global equities up to 50% by 2024, versus 35% in 2019, according to its most recent fiscal report. The pension fund has invested up to $260 billion in global investments, as of October.