NPS Becomes Global Real Estate Investor

Pension fund buys key buildings in Tokyo and London under plan to secure stable long-term returns

The National Pension Service (NPS) conducted a question and answer session on the Internet for two weeks from Sept. 21 to deal with various questions that the public wants answers to regarding the operation of the NPS.
The event, conducted on its Internet website, was designed to arouse interest in the importance of future planning for the public as well as to give the public a better understanding of the working of the NPS.
The NPS conducts the Internet event twice a year since its initial run two years ago. It clarifies the difference between the NPS and private pensions, how long the payment period is and when retirees start receiving their pensions, including the amount. It also answers such pertinent questions as how the unemployed should pay for the pension before reaching the retirement age.
“How much would 750,000 won in monthly pension that a retiree gets now be worth in 20 years? Maybe the price of a pack of chewing gum?” “Are Koreans paying in more and being paid less compared to those in foreign countries?” NPS answers these questions with simple reference materials.
The NPS selected 204 participants in the program to receive prizes: one person received a notebook computer, three people got an electronic dictionary, one hundred got cultural coupons worth 30,000 won each and another 100 got two tickets each to a movie.
The NPS has grown to 18.5 million subscribers since its launch 20 years ago with 3 million retirees currently getting monthly pension payments. Those in their 20s and 30s feel their retirement pension is too heavy a burden and they don’t feel their future retirement plans are necessary yet. Manager Ryu Dong-wan of the Public Relations Department said they expected to make NPS operations more understandable to the public by answering various questions from the public about the NPS and get the attention of young people. “The NPS plans to hold more such events in the future to expand the public’s understanding of what the NPS is all about,” said the PR manger.
In the meantime, the NPS bought two commercial buildings in the heart of London’s business district, 40 Grosvenor Place and 88 Wood Street, for 350 billion won. The Grosvenor Place location is near Buckingham Palace and was named the best workplace in Britain in 2001 and is equipped with high-tech equipment. The second address, 88 Wood Street, is located in a nucleus business district in London and is known for its exquisite design, which helps its office space rental business. The NPS expects a stable long-term return from these commercial buildings.
The United Kingdom’s real estate market went through price changes from mid-2007, raising rental profitability. The NPS jointly bought a building in downtown Tokyo on July 2 with a partner for 460 billion won under its plan to continue to invest in key buildings in important capitals around the world, which are going through price adjustments in the wake of the world economic crisis.
The NPS, also, plans to buy the HSBC building in London for 1.5 trillion won, one of the choiciest properties in the British capital. The Financial Times reported that the NPS bought the building.
SAA represents a systematic process that determines an asset mix based upon the long-term target rate of return, risk tolerance, and capital market expectations. The expected rate of return and long-term prospects for assets and liabilities that are applied to calculate future obligations are additionally taken into account for asset allocation.
The National Pension Fund Management Committee should develop a five-year asset allocation plan on an annual basis as well as annual action plans to cope with changes in the asset-liability surplus and market conditions.
TAA refers to modifications of asset allocations (within a given range) to actively adapt to market changes and to employ market inefficiencies by adjusting the asset mix under SAA.
The weighting of each asset class can be adjusted within a given range (the ranges are determined by the annual plans).
Any deviations from the accepted range of each asset class should be justified and approved by the National Pension Fund Management Committee. nw

This is a photo of the HSBC building in London that National Pension Service bought recently, along with a number of other buildings in London and Tokyo under its overseas investment plan to secure stable and long-term investment returns.