Korean National Pension Service to Make Hedge Fund Investments

Mar 2 2015 | 7:15am ET

Korea’s National Pension Service (NPS) has announced plans to invest into hedge funds by the end of this year. 

NPS has studied the asset class for no less than eight years, and been deciding whether to pull the trigger for three.

NPS’s investment committee has limited the hedge fund allocation to 0.5% of its $430 billion portfolio, or roughly $2 billion. According to an NPS advisor, the initial foray is likely to be into funds of hedge funds, with a gradual expansion into single-strategy and multi-strategy funds as experience grows, and favor developed over emerging markets. 

Korea’s national pension system is a relative latecomer to the hedge fund asset class. Nine of the top ten investors in hedge funds by size are national pension funds and sovereign wealth funds.

Meanwhile, the domestic hedge fund industry in Korea is still in its infancy, meaning NPS will necessarily look primarily overseas for managers. Nonetheless, the fund’s concentration on domestic investments will remain; 73% of NPS's assets were deployed into Korean equities or bonds last year.

NPS posted a 5.25% return on its portfolio in 2014, up from 4.13% recorded in 2013.


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