South Korea’s biggest public pension fund has inked a large-scale deal to buy a majority stake in a European infrastructure company in a partnership with its global peers, despite the COVID-19 outbreak that has dampened investment around the world.
National Pension Service (NPS) struck a contract on April 28 to purchase an 81.1 percent stake in Brisa-Auto-Estradas de Portugal SA, a Portugal’s leading toll road concessionaire, for roughly three billion euros, sources familiar with the matter said. The transaction is expected to complete during the third quarter of this year.
Founded in 1972, Brisa runs a network of 17 motorways and six national highways, with total network length of approximately 1,575km. It is said to have reported operating income of 763 million euros and EBITDA of 554 million euros for 2018. The stake was sold by Arcus European Infrastructure Fund and José de Mello Group, which are selling their respective 40.6 percent ownership in the transportation company as part of the transaction.
NPS formed a consortium with Dutch pension manager APG Asset Management NV and Swiss Life Asset Management to acquire Brisa. This marks the first time that the Korean pension fund has partnered with its overseas peers to strike a deal of this scale. It did not disclose details of the transaction.
NPS is seeking to expand exposure to alternative assets and overseas markets in search of higher returns in the long run. It aims to increase its allocation to alternative assets to 15 percent and assets in overseas markets to 50 percent by 2024, from the current 11 percent and 30 percent of its total assets, respectively.
Ahn Hyo-joon, chief investment officer of NPS, has emphasized several times that the fund intends to pursue more collaboration with overseas partners as part of its efforts to achieve the objective. To that end, it has focused on building strong relationship with major asset managers and pension funds in foreign countries.
Ahn annually visits North America to meet with asset managers and investors there. In February last year, Ahn met with the Canada Pension Plan Investment Board (CPPIB) and the Ontario Teachers Pension Plan (OTPP) during his visit to Canada, which was notable as his previous trips were usually focused on meetings with general partners.
Ahn met with APG Asset Management NV, one of the three investors in the consortium, last summer when he traveled to major cities in Europe last June, including London, Edinburgh and Amsterdam.
A large-scale investment in infrastructure assets in a partnership with foreign pension funds – like the Brisa deal – is considered an effective way to increase exposure to alternative assets. That is why NPS is expected to see an increase in deals consistent with this investment pattern in the future. Collaboration with overseas pension funds also can give NPS more access to information, which could help reduce the investment risk. (By reporter Han Hee-yeon)