Management fees paid by South Korea’s National Pension Service (NPS) to overseas asset management companies reached 1.2725 trillion won ($1.18 billion) in 2019 and have risen 60.8 per cent in the past five years, according to Financial News.
Citing data submitted by Kim Sung-joo, a member of the Democratic Party of Korea, the daily newspaper said on Tuesday (October 13) that NPS paid more than 300 trillion won last year to asset management firms, up from 187 trillion won in 2015.
During the same period, the quantity of funds they were managing almost doubled from 94.4 trillion won to 179.9 trillion won, which meant their portion of the funds entrusted by NPS increased from 50.5 percent to 59.9 percent. They were paid 4.47 trillion won in management fees in the past five years, which represents 78.3 percent of the total fees of 5.715 trillion won.
The fees for overseas asset management firms have increased every year in that period, amounting to 654.6 billion won in 2015, 686.3 billion won in 2016, 884.1 billion won in 2017, 976.1 billion won in 2018 and about 1.2725 trillion won in 2019.
Some are critical of the reliance on offshore firms, arguing that the world’s third largest pension fund needs to develop its own ability to manage funds, including direct overseas investment.
“The NPS is increasing its overseas investment to improve its returns by setting up a comprehensive plan for overseas investment this year, but the burden of management fees paid to overseas asset management companies is also growing due to the NPS’ lack of management capabilities,” Kim said. “In this sense, NPS should find opportunities for direct investment in overseas investment and develop its ability to manage funds.” (Reporting by Jinwon Lee)