Hello, I am Jun Ji-hye, a reporter at The Korea Times. I primarily cover financial authorities and write articles on a wide range of topics related to finance and capital markets. If you have any information to share, feel free to email me at jjh@koreatimes.co.kr, and I will review it carefully. I am committed to always doing my best to communicate with readers through high-quality articles.
NPS's overseas investment fees fail to deliver expected returns
gettyimagesbank
By Jun Ji-hye
The National Pension Service (NPS) has paid over 1.2 trillion won (approximately $875 million) in fees for the management of foreign stocks by third-party managers over the past three years, but the returns from these portfolios have been lower compared to those from direct investments, according to Rep. Suh Myung-ok of the ruling People Power Party, Friday.
The lawmaker noted that the returns from entrusting large sums to asset management firms have been less favorable than those from direct investments, suggesting that outsourced investments are falling short of expectations despite significant costs.
Citing data from the NPS, Rep. Suh reported that the returns on outsourced foreign stock investments were 27.09 percent in 2021, minus 13.03 percent in 2022, 22.45 percent in 2023, and 18.74 percent as of July this year.
In contrast, the returns on direct investments made by the agency were 33.22 percent in 2021, minus 11.30 percent in 2022, 25.85 percent in 2023 and 20.71 percent as of July this year, consistently outperforming outsourced investments each year.
Despite lower returns from outsourced investments compared to direct investments, the NPS paid over 1.2 trillion won in fees from 2021 to 2023, with fees amounting to 398 billion won in 2021, 383 billion won in 2022, and 427 billion won in 2023.
The lawmaker attributed the underperformance of outsourced investments to poor selection and management of asset management firms. She noted that a lack of sufficient local staff to oversee the management firms abroad contributed to this issue.
For example, the NPS’s office in Singapore has been unable to properly staff local personnel, while the London office has failed to meet its staffing quota since 2020. Last year, the London office reduced its personnel quota to zero.
“To improve the NPS’s rate of return, it is essential to thoroughly select and manage outsourced asset managers,” Suh said.
“The NPS must secure more investment professionals and strengthen oversight.”