One thing we know about the South Koreans — they have reversed course in recent years to become big spenders and poor savers. They have also become much bolder investors, after decades of adhering to a more cautious approach.
All this is perhaps why the country’s biggest pension fund, the National Pension Service (NPS), is revelling in a worldwide shopping spree after nearly two decades of conservative investing, which even now sees just 10 per cent of its $240bn funds abroad — with about 77 per cent still in fixed-income holdings, almost all of them Korean.
All that is changing — rapidly — at NPS, which has grown into the world’s fifth largest pension pool since it was established in 1988 to provide pension coverage for private-sector employees and the self-employed.
It now aims to quadruple its foreign investments to about $100bn, of what it hopes will be a $400bn portfolio by 2014. It also estimates that the total value of the portfolio will reach $1,00bn by 2020.
This week, the fund made another splash in the UK with its agreement to take a 12 per cent stake in Gatwick airport from Global Infrastructure Partners, a private equity fund controlled by Credit Suisse and General Electric which bought London’s second biggest airport last year from BAA.
The Gatwick stake will nicely embellish NPS’s burgeoning UK property portfolio after its acquisition last year of several big London buildings including the Canary Wharf headquarters of HSBC for £773m.
NPS indicated last year it aimed to aggressively expand its portfolio of international investments — particularly in property in key cities such as London and New York, as real estate prices decline.
After the UK investments in late 2009, in early January it bought one of the more prestigious office blocks in Sydney’s central business district for A$685m ($626m)
Jun Kwang-woo, NPS chairman, who is spearheading the fund’s international expansion, said the Gatwick deal, worth a little under £100m, would help NPS lift its exposure to Britain from the current 1.3 per cent.
As the FT notes on Tuesday, the fund’s ambitious expansion plans come as Lee Myung-bak, South Korea’s president, is pushing his country’s sometimes reclusive companies to play the international role their size should merit.
Apart from equities and property, another focus for NPS’s nascent international portfolio will be raw materials and energy resources — including investments both in big oil companies and directly in commodities — possibly, according to NPS’s Jun, in Canada and Australia. That strategy could also involve billion-dollar investments in uranium, as a Korean minister said in December.
Of course, national security and resource security is critical to Korea — and to a national pension fund, Jun acknowledged. However, he told the FT, it was important to correct any residual misconceptions that NPS was a sovereign wealth fund that would blindly-back broader government strategies:
“It is very important to emphasise the priority for the NPS, when it comes to making investments, that the driving force should not be government policy… Our investment should be driven by investment merit and it is good if that is in line with government policy.”
That said, he argued that there was “ample” room for overlap in the interests of government and the NPS. So — airports? Smart office blocks? Uranium mines? Big oil?
Possibly all part of the overlap at NPS.
Related links:
S.Korea fund aims to revive investment – FT
Gatwick’s new owner promises £900m facelift – The Times
Evolution of an airport price – FT Alphaville