NPS gears up for multi-asset investments

The National Pension Service of South Korea (NPS) has set criteria for selecting asset managers for a multi-asset strategy, which is another step towards diversifying the pension scheme’s exposure to alternative investments.

Eligible candidates should have at least $500 million of the fund’s assets under management, and a track record of at least two years in the proposed strategy. They must also propose a fund with the same or similar strategy to that specified by NPS.

A multi-asset fund invests in various asset classes, such as equities, fixed income and alternatives, and actively adjusts allocations to each asset class in order to generate a return above specified benchmarks.

Like other alternative investment funds, the risk-return profile of a multi-asset fund is usually set between those of foreign stocks and foreign bonds. On the other hand, it is comparatively more liquid and transparent because of allocations to publicly-traded assets such as stocks and bonds.

NPS has not yet invested in a multi-asset fund, but has decided to expand its investment scope as a growing appetite for alternative assets in private markets has led to increased competition for assets globally.

The pension fund decided in 2019 to allocate up to 2.4% of its total assets to multi-asset and private debt funds, and later that year invested in a private debt fund focusing on direct lending in North America and Europe.

With the criteria set in place, NPS may look for multi-asset managers soon, industry watchers said. The selection process will include evaluating proposals and conducting interviews. (Reporting by Hee-yeon Han)