NPS to set up San Francisco office in AI, biotech push

Korea's National Pension Service Investment Management, the investment arm of the world's third-largest pension fund, will launch its fourth overseas office in San Francisco before September, in line with its asset allocation strategy to raise alternative and overseas investments.

National Pension Service Chief Investment Officer Seo Won-joo boasted that the pension fund’s record high investment return of 13.6 percent, worth 127 trillion won ($96.4 billion), last year is “equivalent to 20 percent of the Korean government's annual budget and 11 times the operating profit of Tesla last year.”

“We will spare no efforts to enhance the flexibility of the asset allocation system to increase returns and promote investment diversification to ensure that people's precious retirement funds are managed stably,” Seo said during a press briefing held on Thursday.

With its assets under management reaching 1,035 trillion won, the fund is the world’s third largest fund following government funds in Japan and Norway. However, pension payments are expected to surpass pension revenue from 2030.

“The fund will grow until 2040 due to the profit from investments. There is still room for us to invest actively,” said Son Hyup, head of the Investment Strategy Division at the NPS.

In the third quarter, the National Pension Service Investment Management plans to open its fourth overseas office in San Francisco, California. Three other offices are located in New York, London and Singapore.

“The launch is aimed at enhancing accessibility to Silicon Valley, the mecca of artificial intelligence and information technology, and also the biotech sector, where a lot of investments have been made,” said Lee Suc-won, managing director of Investment Strategy and Responsible Investment & Governance.

By asset class and on a money-weighted return basis, the top-performing asset class last year was global equities with a return of 23.89 percent, followed by local equities at 22.12 percent, global fixed income at 8.84 percent, domestic fixed income at 7.4 percent and alternative assets at 5.8 percent.

As for the reason behind the NPS’ increasing exposure to overseas investments, Son said it would mitigate the downward pressure that the pension could exert on the Korean capital market when it has to sell off its current portfolio in the event of fund depletion.

He also called alternative investments a useful tool to diversify their portfolio and hedge against risk and the pension fund will continue to raise the alternative investment ratio to replace bonds with worsening profitability.

On the government’s Corporate Value-up Program, aimed at increasing shareholder returns to boost Korea's undervalued stock market, Lee said the pension fund agrees with the purpose of the measures and would set detailed strategies, including whether to invest capital, once the specific details are decided.

“Since the reason for the existence of the National Pension Service Investment Management is to maximize profits from fund management, we agree with the direction of the Corporate value-up program to resolve the Korea discount,” he said.

Meanwhile, the Financial Services Commission said Thursday it has revised a stewardship code to ensure institutional investors play a role in encouraging efforts to improve corporate governance and returns to shareholders.

“When investors properly evaluate the efforts of listed companies and reflect them in their investment decisions, a virtuous cycle can be created in which companies strengthen their efforts to increase corporate value,” FSC Vice Chair Kim So-young said during a meeting with institutional investors, including the National Pension Service Investment Management.