South Korea is on a mission to raise its international profile. Last month, the country signed its first nuclear export deal, worth $20bn, with the United Arab Emirates. The state-run Korea National Oil Corp has lined up $6.5bn for overseas acquisitions. Now the National Pension Service has said it will spend up to £100m to increase its stake in London's Gatwick airport to 12 per cent from 1.3. In the year that South Korea sits as president of the Group of 20, Seoul seems determined to prove its global credentials.
In isolation, the Gatwick investment seems risky for a fund used to holding three-quarters of its $240bn portfolio in fixed income and only a 10th abroad. Last year, passenger numbers at London's second airport fell 5 per cent and the single runway leaves the airport inherently constrained – for now.
Timing the market, though, is everything. In the past three months, passengers have begun to come back and the airport's regulated returns make it an effective inflation hedge. The buy-in price seems fair and roughly in line with Gatwick's regulated asset base versus premiums of 30 per cent that pension and infrastructure funds offered for UK regulated assets a few years ago. Furthermore, majority owner Global Infrastructure Partners has proved its expertise at London City airport.