Government Employee Pension Fund Turns to Overseas 'VC Investment'

[Asia Economy Reporter Park So-yeon] The Government Employees Pension Service (GEPS) is expanding its delegated investment scope to include overseas venture capital (VC). Until now, GEPS has primarily invested in domestic VCs, but it plans to shift its strategy to secure more stable profitability amid uncertain market conditions.

According to the investment banking (IB) industry on the 17th, GEPS is currently reviewing the investment scale and conducting risk analysis for a capital contribution to a prominent VC in the United States. The strategy is to enhance profitability through delegated investments in local VCs that possess diverse data and portfolios related to Silicon Valley startups.

This move is also related to the recent shift from a continuous upward trend to a decline in domestic venture investments. The domestic venture market has rapidly contracted due to global economic downturns caused by interest rate hikes, sharp increases in international oil prices, and inflation. Institutional VC investments are now focusing more on capital recovery than growth potential.

With criticisms that domestic startup valuations have been overestimated, the domestic venture ecosystem is currently shrinking. On the other hand, the global VC market is somewhat different. It is relatively more responsive to market impacts than the domestic industry and continues to discover undervalued blue-chip stocks, prompting many institutions, including GEPS, to seek investment opportunities.

Recently, GEPS revised its internal regulations to allow private placement methods in addition to the existing public offering method when selecting delegated asset managers. This is interpreted as a strategic decision by Baek Ju-hyun, the Chief Investment Officer (CIO), who began his term in July. Other institutions such as the National Pension Service and the Teachers’ Pension have already been appropriately utilizing private placement methods for alternative investments.

Director Baek has accumulated overseas investment experience and networks while working at Samsung Life Insurance’s New York branch. At Samsung Life, he was mainly responsible for overseas investment projects and is known as an overseas investment expert, having led overseas mergers and acquisitions (M&A) in the alternative investment sector. His experience aligns well with GEPS’s ongoing need to diversify revenue sources through overseas asset investments in response to increasing market volatility, suggesting significant changes in investment strategy.

Last year, GEPS selected IMM Investment, SV Investment, and Aju IB Investment as delegated asset managers in the VC sector and contributed a total of 45 billion KRW, with 15 billion KRW allocated to each. A similar scale of VC contributions is expected this year as well.

Meanwhile, as of the end of 2021, GEPS’s financial assets totaled 8.1055 trillion KRW, comprising bonds at 2.9032 trillion KRW (35.8%), stocks at 2.3212 trillion KRW (28.6%), alternative investments at 2.0911 trillion KRW (25.8%), and payment reserves at 790 billion KRW (9.75%).

This content was produced with the assistance of AI translation services.