Goldman Sachs losing pension fund’s business

After Goldman Sachs Asset Management pulled the plug on its operation here, it turned out the National Pension Service was giving it lots of business investing its overseas investments and paying it large amounts in fees.

It’s taking its business elsewhere.

“For a foreign financial company to manage a local asset it needs to have an operation here in Korea,” said an official at the pension office. “As Goldman Sachs is pulling out, it no longer meets the conditions and our investments were automatically returned.”

The pension service said it could not disclose the amount refunded. Other investments made by institutional investors with Goldman Sachs were said to have been refunded as well.

This revelation led to another: That the pension system has given the business of overseeing its overseas investments to foreign companies like Goldman Sachs, not local companies.

The National Pension Service is a major global institutional investor with assets that amount to 380 trillion won ($350.85 billion). It is considered to be one of the top four pension funds in the world whose investments are concentrated in financial products.

As of the end of September, the National Pension Service had 31.8 trillion won invested in local stocks, 23.7 trillion won in local bonds, 23.9 trillion won in overseas stocks and 9.8 trillion won in overseas bonds.

Nearly 50 companies are commissioned by the service to manage local stocks and bonds, 37 Korean.

However, although there are 55 companies managing the service’s overseas investments, none are Korean.

It’s estimated that the pension fund paid 95 billion won to foreign asset management firms, including Goldman Sachs, last year for overseas investment management.

Total commission payments - foreign and local - are speculated to exceed 120 billion won.

Goldman Sachs unexpectedly announced it was closing its office here on Nov. 13 citing disappointing performance.

The U.S. financial company opened its operation here in 2007 after acquiring a 160 billion won joint venture set up by Macquarie and IMM Asset Management.

However, after the global financial crisis in late 2008, Goldman Sachs struggled, losing around 5 billion won every year. Last year it posted a net loss of 7.2 billion won, the largest among foreign asset management companies.

By Lee Ho-jeong [ojlee82@joongang.co.kr]