Continuing its search for overseas alternative investments, South Korea's National Pension Service (NPS) is collaborating with Korea-based private equity MBK Partners to bid for British retailer Tesco's Korea unit Homeplus.

Aside from the NPS, MBK is also working together with the Canada Pension Plan and Singapore's Temasek Holdings. Two other rival private equity teams have also been formed for the hotly contested retail firm. Asia-based Affinity Equity Partners has partnered up with KKR and the Carlyle Group is working with Singapore sovereign wealth fund GIC.

Valued at US$6 billion, Homeplus is the latest alternative investment move NPS is eyeing. As the world's fourth largest pension fund, the institutional investor has made it a point to consistently diversify its overseas asset holdings.

At US$419.1 billion in size, the fund is massive and is equivalent to 33.5% of Korea's GDP and as a result often has difficulty finding significant returns in the domestic market. The NPS invests nearly 22% of its global assets in markets overseas and Asia Pacific accounts for about a quarter of those investments.

Recently, the pension fund has turned its attention to alternative investments as a way of generating greater returns. The pension fund allocated 9.9% of its assets to alternative investments last year, up from 9.4% in 2013. That resulted in a 12.3% return from the fund's alternative portfolio in 2014.

In March, the fund purchased the Stockholm Centum, a shopping mall in Sweden for US$422 million and last year it sold HSBC's Canary Wharf headquarters for US$1.88 billion generating approximately US$630 million in profit.

The fund has also announced that it was looking at investing 0.5% of its assets or roughly US$2.1 billion into fund of hedge funds strategies. Overall the fund plans to have around 11.5% of its assets in alternative investments.

"We are constantly trying to diversify our portfolio to reduce the dependency on the domestic market and achieve stable returns. In fact, NPS has positively contributed to the overall fund performance as we have gradually increased the share of both global investment and alternative investments," says Kwang Choi, chairman and CEO of the NPS in the fund's 2014 annual report.