Korea’s National Pension Service (NPS) is one of the world’s largest pension funds, with €718bn-worth of assets. Currently, the fund is in a growth period where collected contributions are much higher than pension payouts, allowing for active investment with ample liquidity. As the fund continues to grow in size, NPS has increased allocation to overseas and alternative assets to overcome the limit of small domestic markets and secure its long-term financial stability.

At end-2023, alternatives made up 15.9% of its overall portfolio; this allocation included 30% (€33.5bn) in real estate, and 26% in infrastructure, with 85% of alternatives invested overseas. The portfolio achieved a 5.8% return in 2023, with a ten-year annualised return of 9.74%.

To diversify the real estate allocation, NPS pursued a number of initiatives, including collaboration with FTSE Russell in developing the world’s first index tapping into niche and non-core sectors benefiting from technological and demographic change.

NPS committed €500m to a separately managed account for pan-European core logistics, a programmatic joint venture in partnership with publicly-traded REITs. Simultaneously, the NPS infrastructure team focused on investments in promising sectors to respond to market volatility. NPS invested €92.5m in transportation facilities that likely benefit from economic recovery, KRW250bn (€171m) in digital assets in line with data growth, and KRW260bn in the utilities sector, which has a low volatility.

NPS has further diversified its portfolios by strategy and geography to secure stability. To defend against inflation, the allocation to core and core+ strategy was increased. To complement investment returns, NPS invested €700m in value-added and US$150m in infrastructure debt. These efforts led a return of 12.29% in global infrastructure investments, equivalent to €2.7bn.