The race to become external managers of South Korea’s National Health Insurance Service (NHIS) is heating up among asset management firms, with the NHIS recently announcing its plan to select external managers to provide up to 1.4 trillion won.
The state health insurance scheme will receive applications for the selection of two external managers that will lead its investment in alternative assets by April 14, according to industry sources on April 8. The two selected managers will each receive up to 700 billion won from the scheme to invest in other underlying funds focused on alternative assets such as real estate, infrastructure and private equity for four years.
Industry observers said it is quite a large amount of commitments that the NHIS puts 1.4 trillion won solely in alternative assets. With the NHIS stating eligible candidates must be asset management firms with over three trillion won allocated to alternative assets as of the end of 2019, competition among candidates are likely to be fierce.
According to Korea Financial Investment Association (KOFIA), there are 14 asset management firms with over three trillion won allocated to alternative assets as of the end of 2019. Industry observers consider four to five firms with an outsourced chief investment officer (OCIO) service experience as strong candidates.
Among them are Samsung Asset Management and Korea Investment Management that manage the pool of limited partners’ investment and Mirae Asset Global Investments which leads National Housing and Urban Fund (NHUF)’s investment.
Shinhan BNP Paribas Asset Management who is an external manager of the Radioactive waste management fund and Hanwha Asset Management, which is growing rapidly over the past few years, may join the race as well.
“There are not many asset management firms who meet NHIS’ eligibility criteria” said an industry source. The source added that major large-sized firms who are capable of raise and manage funds are likely to participate in the race.
KB Asset Management, which participated in the race to receive an OCIO mandate, is expected to join the competition to be picked as NHIS’ external manager.
Industry watchers initially expected more institutional investors to pick asset management firms to mandate them as external managers this year. However, growing number of institutional investors have postponed their plans amid the spread of the coronavirus.
Against this backdrop the NHIS’ plan to pick external managers is likely to garner more attention from the industry due to the fact that it will commit large amount of money and there hasn’t been any institutional investor who is up for the OCIO business lately. Amid unfavorable conditions for asset management firms to sell public offering funds or private equity funds, which are firms’ main source of income, firms are expected to pay more attention to the OCIO business.
(By reporter Kim Jin-hyun)