Global asset firms flock to Jeonju to woo pension giant

NPS’ increasing exposure to overseas assets presents opportunities for foreign firms

National Pension Service's headquarters located in Jeonju, North Jeolla Province. (National Pension Service)

An increasing number of household names in the global capital market scene are setting their sights on Jeonju, a touristic provincial city in the southern part of Korea, opening new offices there in the hopes of strengthening ties with pension giant, the National Pension Service.

In 2017, the NPS moved down to Jeonju, a three-hour drive from Seoul in North Jeolla Province, as part of a campaign to ease overconcentration in the country's capital.

While the pension giant itself has experienced difficulties with recruiting after the relocation, some global asset behemoths are setting up new establishments in the city, targeting the third-largest pension fund in the world.

On Nov. 8, the NPS announced Blackstone, the world’s largest alternative investment manager running $1 trillion in assets, has decided to open a liaison office in Jeonju next year.

The private equity manager, which already has a branch in Seoul, said it hopes to increase cooperation with the state pension fund manager by operating an office near its headquarters.

Blackstone is not the first global PE firm to reach out to the southern city with a population of some 650,000.

Franklin Templeton Asset Management and BNY Mellon, both with assets under management surpassing $1 trillion, were added to the list of Jeonju residents this year, following two custodian banks, State Street Bank and Trust Co. and Bank of New York Mellon Trust Co.

Strengthening ties with the pension operator that manages over 1,000 trillion won ($767 billion) is the apparent motivation behind the move.

“By having a liaison office nearby the NPS headquarters, firms can increase communication with the pension fund operator,” said Kim Yong-ha, a professor at Soonchunhyang University. Kim is a member of the national pension reform committee.

Though concerns on the pension fund’s depletion grow in Korea, the NPS remains a big name in the global capital market with its managing assets surpassing 1,000 trillion won on Sept. 15, the first time since it was founded 35 years ago.

"Though the pension fund is expected to be fully drained in 2055 for the time being, with the upcoming reforms, it will take a much longer time for the fund to reach depletion. Even without the reforms, there is more than enough time for long-term investments,” Kim said.

The migration to the south could be an attempt to win favor with the fund operator to receive a larger delegation of assets, according to industry sources.

Back in 2012, when Goldman Sachs Asset Management shut down its operation in Korea, the NPS announced it would evaluate finance firms’ attribution to the local finance market such as the existence of a local branch or the size of local employment in selecting its external asset managers.

“Opening an adjacent office is one of the easiest ways to show external asset managers are sincerely contributing to the Korean market,” an official from a local public fund manager said, adding, “State funds often encourage firms to open up offices, too.”

"Furthermore, by having a money manager nearby its customers, in this case, the NPS, firms can hope for better sales records as the individuals establish a relationship," the official said.

Global asset managers' attempt to improve ties with the NPS comes as the pension operator works to inch up its share of foreign investments. The pension giant's share of global investment has surpassed that of domestic investment in terms of volume, taking up 51.3 percent of the total share as of the end of August.

As fund operators often prefer to make overseas investments through foreign asset managers under the conception that they can perform better than their domestic counterparts, the increasing exposure to overseas investments is an opportunity for overseas asset managers to win more allocation from the NPS fund, sources said.

Kim also noted that political pressure could play a part in the NPS encouraging global asset managers to open up offices in the provincial city. North Jeolla Province aims to make the region a finance hub, having announced the plan to build an international finance center by 2025 next to NPS headquarters.

“We are not sure about how the liaison offices are actually operated in terms of size or business. In a way, the offices could be a mere way of promoting the image that Jeonju can be a hub of finance,” Kim said.

In earlier statements, NPS Chairman Kim Tae-hyun said global asset firms opening contact offices in Jeonju would be able to strengthen the partnership between the firms and the NPS. The pension operator declined to make further comments on the matter in response to a media inquiry from The Korea Herald.

By Im Eun-byel(silverstar@heraldcorp.com)