The National Pension Service (NPS), South Korea’s state-run pension fund and the country’s largest institutional investor, has shortlisted four asset managers for a coveted mandate to oversee value-add real estate funds.
The Korean pension giant has named Pebblestone Asset Management, Pacific Investment Management, Hanwha Asset Management and Hyundai Investments as the final contenders, people familiar with the matter said on Monday.
The NPS plans to select two managers from among the four by the end of August after qualitative assessments, sources said.
FIRST SELECTION IN SEVEN YEARS
It is the first time in seven years that the NPS, one of the world’s largest pension funds with 1,228.4 trillion won ($904.6 billion) in assets under management, is tapping new external managers for domestic real estate investments.
The initiative is part of a broader effort to diversify its property portfolio, while also providing promising mid-sized firms with opportunities for business expansion.
Under the program, the NPS will commit a total of 500 billion won ($360 million) across two firms, each managing between 295 billion won and 415 billion won, depending on their proposals.
Only firms with less than 5 trillion won in real estate assets under management as of the end of last year were eligible.
The funds will focus on value-add strategies in domestic commercial real estate, excluding residential assets, such as repurposing and renovating properties to enhance income streams, sources said.
TICKET TO ENTER BIG LEAGUE
More than 10 managers have submitted proposals since the call for applications in May, underscoring the prestige and commercial upside of landing a mandate from the NPS.
Market watchers said the two chosen managers will be granted not only the chance to scale but also added credibility to attract further institutional capital.
The heightened interest reflects the scarcity of institutional-grade mandates in the Korean real estate market, where a handful of dominant players control a large share of domestic allocations.
NPS has been gradually ramping up its exposure to alternatives, particularly real estate and infrastructure, in recent years to boost long-term returns.
By Gyeong-Jin Min
min@hankyung.com
In-Soo Nam edited this article.
