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South Korea’s National Pension Service (NPS) has restructured its organization in a bid to become more nimble at responding to investment opportunities in alternative assets abroad.

One year after making structural changes in its alternative investment department, the NPS has made another alteration to split the division based on geographies, according to sources familiar with the matter on January 9.

At the beginning of 2019, the state pension fund divided its alternative investment department into three divisions based on asset classes: private equity, real estate and infrastructure. A year later, it has again divided each division into three teams based on regions – Asia, Europe and the Americas – creating a total of nine teams under three divisions.

The move came as the pension fund’s exposure to alternative assets has shown an upward trend in recent years. As of the end of 2019, alternative investment accounted for 12 percent, or 76.6 trillion won ($66.2 billion), of the fund’s total assets under management (AUM). This represents a 12 percentage-point increase from the previous year. By asset class, the NPS holds assets worth 24.3 trillion won ($21.0 billion) in private equity, 28.3 trillion won ($24.4 billion) in real estate and 22.7 trillion won ($19.6 billion) in infrastructure, respectively.

“We intend to diversify our strategies by shifting exposure from domestic bonds to overseas investments and alternative assets in an effort to enhance returns and hedge risks,” said the NPS in its annual report. “In the mid to longer term, we plan to increase our allocation to alternative assets to about 15 percent of the AUM by 2023.”

Overseas alterative assets accounted for more than eight percent of the pension fund’s AUM as of the end of last September, while investments in domestic alternative assets accounted for less than four percent. The increase in overseas alternative investments as a share of the fund’s AUM has accelerated since 2014 when it first surpassed the share of domestic alternative assets. Overseas alternative investments by the NPS have continued to increase from 24 trillion won ($20.7 billion) in 2014 to 41 trillion won ($35.4 billion) in 2016 and 52 trillion won ($44.9 billion) in September of 2018.

The latest structural changes are seen as part of the state pension fund’s effort to be more active in sourcing deals in alternative asset classes abroad, with a focus on different investment environments in each region.

Against this backdrop, the role of the pension fund’s overseas offices – which are located in New York, London and Singapore – is expected to continue to grow in the future. The teams responsible for each region plan to cooperate with the overseas offices in order to respond more quickly to investment opportunities in alternative assets abroad.

(By reporter Han Hee-yeon)