NPS expands investment in global PEF

The headquarters of National Pension Service (NPS) located in Jeonju / Courtesy of NPS

By Anna J. Park

The National Pension Service (NPS), the nation's largest institutional investor with around 835 trillion won ($740 billion), appears to have acquired a stake in a global private equity firm (PEF) for the first time a couple years ago, in an effort to increase the portion of alternative investments in its portfolio.

According to the investment banking industry Tuesday, the NPS made a strategic investment into London-based PEF BC Partners sometime in 2019.

The investment, however, is not a direct acquisition of the global PEF's stakes. It was rather an indirect and joint stake investment into the U.K. PEF through a Blackstone fund that acquired around 10 percent or 15 percent of BC Partners' stakes with about 500 million euros in the summer of 2019. New York-based Blackstone's Alternative Asset Management division acquired the stake in its London-based private equity rival with the raised capital through the fund to seek joint growth of the buyout industry.

Although the specific amount of the NPS' entire investment into BC Partners is not revealed due to the pension operator's refusal to disclose sensitive information about its investment portfolio, an NPS official told The Korea Times said it's roughly “several hundreds of millions of dollars.” The official also explained it was the first time that the NPS acquired a stake investment in a PEF.

“The deal was the NPS' first investment into a global unlisted PEF,” the official said, adding that more detailed information about the deal cannot be confirmed or explained to protect the investment strategy of the country's pension operator.

The NPS has the right to a significant stake in BC Partners, which has over $40 billion in assets under management (AUM) across various fields from private equity, credit and real estate globally. The U.K.-based PEF made investments into around 120 companies around the world, whose aggregated market cap stands at around 200 billion euros. The nation's pension operator will be provided with the firm's investment profits as well as joint investment opportunities.

NPS to further diversify with increasing alternative investments

The world's third-largest pension operator's move to expand the scope of its investments to the realm of acquiring stakes in global PEFs is in line with the NPS' long-term investment goal of increasing its portion of alternative investments.

About 10 percent of the NPS' total assets of 835 trillion won, as of the end of last year, accounted for alternative investment, and about two-thirds of it, or around 61 trillion won, have been invested in overseas alternative investment portfolios.

According to the pension operator's five-year plan, the alternative investment's portion ― combining both domestic and overseas investments ― needs to exceed the 13 percent mark by the end of 2021, and 15 percent by 2024.

In a series of moves to achieve the five-year plan, the NPS joined hands with Allianz Group last year, jointly creating a fund of about 2.8 trillion won to invest mainly in real estate in major global cities in various countries, including Australia, Singapore, Japan and China.

The NPS also collaborated with Dutch pension fund manager APG last year to jointly invest in diverse infrastructure facilities in Portugal and Australia.