NPS to add 200 global investment staff to cut fees, emulating CPPIB

  • 2020-07-31

The National Pension Service plans to carry out about a fivefold increase in overseas staffing by 2024 which will help to reduce external management fees by nearly 700 billion won ($588 million), according to a source familiar with South Korea’s 725 trillion won ($630 billion) pension fund on July 31.

The NPS plans to add 200 more employees to the existing 149 employees that cover overseas investments over the next four years. Among the 200 additions, 160 employees will be based outside of Korea and 40 employees will be based in Jeonju, Korea at the NPS headquarter.

Employees will be selected from the Jeonju headquarter as well as from the domestic and overseas investment industry.

It resembles the steps of Canada Pension Plan Investment Board (CPPIB) which has successfully recruited high-profile financial experts from investment banks and private asset management firms to increase direct investments into private asset classes. Its current CEO Mark Machin was hired by CPPIB from Goldman Sachs in 2012. Such efforts were aimed to reduce management fees paid to external asset managers and enhance its competitiveness in global investments.

CPPIB has more than 1,600 employees working across five different continents. It operates eight offices internationally in New York, Mumbai, San Francisco, London, HongKong, Sydney, Sao Paulo and Luxembourg.

The NPS plans to build strategic partnerships with global asset managers and pension funds such as purchasing stakes in global asset management companies to improve its deal sourcing capabilities.

 

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Neung-hoo Park, Minister of the Ministry of Health and Welfare, speaks at the 8th National Pension Fund Management Committee on July 31

 

NEW YORK OFFICE WILL HOUSE 83 EMPLOYEES BY 2024

The NPS’s plan to beef up overseas staffing was fueled by Hyo-joon Ahn, the current chief investment officer, who has tried to improve the pension fund’s expertise in overseas investments.

In particular, there is a great focus on boosting the pension fund’s alternative asset division. As of 2020, there are 65 employees at NPS that cover global alternative assets. This is expected to increase to 157 employees by 2024, which accounts for nearly half of the overseas investment staffing target of 349 by 2024.

In addition, a private debt team and a secondary investment team will be created under the existing private equity division which will help to increase expertise over subdivided asset classes.

NPS has drafted such measures to bolster overseas offices’ authority. In the past, overseas offices mainly functioned as liaison offices without the authority to make investment-related decisions.

Going forward, NPS will dispatch senior-level officials from its alternative asset management team to overseas offices so that they can directly originate deals and hold committees to make investment decisions.

Currently, there are 41 employees based in three overseas offices, including 17 employees in New York, 14 employees in London, and 10 employees in Singapore. By 2024, NPS will increase the staffing to house 83 employees in New York, 73 employees in London, and 45 in Singapore which in total exceeds 200 employees.

The pension fund’s plans will need to be endorsed by the Ministry of Economy and Finance which oversees the budget for government agencies.

By Chang Jae Yoo and Jung-hwan Hwang

jung@hankyung.com

<Edited by Danbee Lee>