The South Korean Government Employees Pension Service (GEPS) has been rated highly by the Ministry of Economy and Finance’s fund management evaluation team, especially in the way it awards mandates for alternative investment strategies.
The 2019 Fund Management Evaluation Report, released by the ministry on June 1, praised GEPS’ well-designed general partner selection process, calling it “exemplary for other funds” in the country.
According to the report, GEPS develops an investment model – subject to approval by its alternative investment committee – most suitable for the pension scheme with consideration of its portfolio and market conditions before starting the selection process. Then GEPS rates how well each investment model proposed by candidates is aligned with its ideal alternative investment model to reflect the rating in the final results.
GEPS had 8.89 trillion won ($7.3 billion) under management at the end of 2019. Alternative assets accounted for about 1.65 trillion won or 18.5 percent of the fund’s portfolio, with the capital allocated to segments including private equity, private debt, real assets and hedge funds.
Meanwhile, GEPS earned 8.55 percent on its investment in overseas private equity in 2019, which was much lower than the benchmark return of 17 percent. The return on investments in hedge funds was 3.45 percent, also falling short of the 7.43 percent benchmark.
“It is very positive that (GEPS) is making efforts to improve the alternative assets quality but the fund may take this opportunity to review the investment process for better returns,” the report noted.
Overall GEPS received an “excellent” rating in the evaluation based on both qualitative and quantitative measures. The evaluation team, composed of 35 private experts, rated 45 domestic funds including GEPS this year. (Reporting by Hee-yeon Han)