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Korea’s NPS hires Russell Investments for US$1 billion global real estate mandate

By Hui Ching-hoo   
December 29, 2020

South Korea’s National Pension Service (NPS) has appointed US asset manager Russell Investments for a US$1 billion global listed real estate mandate, the pension giant’s latest move to step up exposure to alternative assets.

This is Russell Investments’ second global real estate securities mandate from NPS, the company says in a statement on December 24.

It did not provide more details on either mandate, and spokespersons for the pension fund did not immediately respond to questions from Asia Asset Management (AAM).

According to Scott Kim, the head of NPS’s real estate investment division, the new mandate allows the fund “to efficiently capture the potential price discrepancies between public and private real estate markets” and it will also be “an excellent portfolio diversifier”.

“We are excited to further expand our listed real estate capability to capitalise [on] public real estate market opportunities and complement the private real estate portfolio,” Mr. Kim says in the statement.

The NPS has been increasing real estate investments in recent years as part of its plan to raise allocation to alternatives from 11.4% of total assets in 2019 to 15% by 2023 in order to diversify risk.

Among other things, it provided unspecified funding to Singapore property manager ARA Asset Management to establish two South Korea-focused real estate investment trusts in 2015.

The NPS has been “actively engaged in the cutting-edge real estate asset classes, even amid the Covid-19 pandemic”, Pete Gunning, global chief investment officer of Russell Investments, says in the statement.

Real estate is one of the major tools in the NPS’s alternative investment arsenal, according to a Hong Kong-based fund manager.

He says the annualised five-year return of the pension fund’s real estate investments was 9.4% as of December 2019, better than the average 8.5% return for its overall alternative assets.

“Real estate now represents the largest share of the fund’s alternative allocation at over 37%. I believe NPS will continue to increase the size of its real estate investments, with its stable performance,” the fund manager tells AAM, speaking on condition of anonymity.

NPS, the world’s third largest pension fund, had 785 trillion won ($674 billion) of total assets as of September 2020.

Seattle-based Russell Investments had $297.5 billion of assets under management as of September 2020.