NPS posts higher returns in 2016

South Korea’s National Pension Service managed to turn out a marginal increase in investment returns in 2016 amid a corruption probe, departures of investment staff, and an office relocation.

South Korean state pension fund, National Pension Service (NPS), saw its investment returns improve marginally in 2016 compared with the previous year, the Ministry of Health & Welfare, which oversees NPS, said on Tuesday.

The pension fund generated returns of 4.75 percent in 2016, up from 4.57 percent in the previous year.

Assets held by NPS at end-2016 also rose by 9 percent, from KRW 512.3 trillion ($445 billion; €425 billion) in 2015 to KRW 558.3 trillion this year. The growth was mainly attributed to double-digit returns from its overseas equity and alternative investments.

NPS’s global alternative portfolio, which accounts for 7.5 percent of its portfolio, was its best-performing segment in 2016 with a return of 12.3 percent, although that figure is slightly lower than the previous year’s 14.9 percent.

Over the past five years, that portfolio also posted the strongest returns across all of the pension fund’s investments, delivering an average return of 11.2 percent, more than double the 5.07 percent rate of return on total investments during the same period.

Meanwhile, NPS’s domestic alternatives portfolio which is nearly 4 percent of its total assets, posted 6.7 percent in average returns over the same five-year period.

The data, however, did not provide a breakdown of individual asset classes in alternatives.

Last year, the fund committed approximately 8 percent or about KRW500 billion ($435 million; €393 million) to Blackstone’s long-term private equity vehicle Blackstone Core Equity Partners, which is targeting $5 billion. NPS also picked four domestic private equity managers to manage KRW700 billion of its funds: VIG Partners and Skylake Investment each received KRW 250 billion to invest in large-cap companies, while Lindeman Asia Investment and SG Private Equity got KRW100 billion each to invest in mid-sized companies.

The welfare ministry also revealed in the report that NPS will increase the number of staff in its overseas offices (London, New York and Singapore) from 23 in 2015 to up to 40 this year, as it looks to ramp up overseas investments

The steady returns come during a time of flux for the pension fund which reshuffled its alternatives division last year, as several division heads left. Most recently, Yoo Sang-Hyun, a former head of alternatives at NPS, and Yang Young-sig, a former head of investment strategy, left the firm. The pension fund’s office in Seoul was also raided in December by South Korean prosecutors in relation to a corruption scandal allegedly involving NPS, Samsung Group and impeached South Korean president Park Geun-hye.