To cope with structural market changes, National Pension Service (NPS) constantly seeks to diversify its real estate and infrastructure portfolios with promising new and underweight sectors.

For real estate, in the period under review, NPS developed the world’s first index for niche and non-core sectors. This was in collaboration with FTSE Russell and the objective was to use it as a benchmark and tracking vehicle to allow the fund to strengthen its listed portfolio by investing in REITs. This was part of its opportunistic approach to exploit the growth potential and low correlation with the economic cycle of the advancement in 5G technology and demographic changes as a result of an aging population. The index has 70 constituents across ten countries, including Australia, Singapore, the US and the UK and specifically includes a mobile phone mast, senior care facilities and single family home assets.

In 2023, NPS committed €500 million to a separately managed account for pan-European core logistics, a joint venture programme in partnership with publicly-traded REITs. To cope with market cycles and volatility, it also committed €230m to a global debt commingled fund and €238 million to side-car investments in the UK.

NPS further diversified its portfolios by strategy and geography to maintain stability and protect itself against inflation. This included increased allocations to its core/core+ strategy. To supplement investment returns, it invested €700m in value-added assets and $138m in infrastructure debt.

NPS’s well-diversified alternative portfolio achieved a 5.8% annual and 9.74% 10-year annualised return in 2023. It intends to expand its horizon to new investment sources and secure investment opportunities in a timely manner to continue build a stable and well-balanced portfolio that is further diversified by sector, strategy and geography