South Korea's National Pension Service’s First Move into Hedge FundA $420 billion pension fund South Korea's National Pension Service (NPS), announced it has made its first move into hedge funds by allocating the amount of $2.1 billion, or 0.5% of its total assets under management to hedge funds.
As of November 2014, NPS, the world's third largest pension fund, has a total of USD426bn in AUM. The hedge fund allocation was approved late last week after eight years of studying the asset class. Sources said the NPS will make its first investment into hedge funds before the end of 2015. Reports said NPS will first invest in multi-strategy Fund of Hedge Funds and then expand into larger hedge fund strategies. An official from NPS told South Korea's media that hedge fund investments will diversify the risks of the entire pension fund's portfolio. NPS first began exploring hedge funds as early as 2007.
This month the fund had reported improved returns on the fund in 2014 though those returns were still at a level below the five year average due to falls in the domestic stock market. Yonhap news reported that the NPS, which is the country's largest institutional investor, achieved a return of 5.25% last year, compared with a 4.19% gain the previous year.
NPS also announced last week that it would opened offices and recruit staff in Singapore this year to focus on the fundâ€™s investments in the alternatives space including hedge funds.
The move ny NPS follows similar changes in strategy last year at Japan's giant Government Pension Investment Fund, which saw a reported 5% of its assets move into alternatives, in their case private equity, infrastructure and real estate. That changed formed part of a wider strategy to diversify away from Japanese government bonds which had comprised a majority of its asset.Source: Asia First Financial Intelligence Limited