South Korea’s pension fund to boost portfolio of overseas stocks

2018.05.31 13:29:37 | 2018.05.31 14:43:37

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South Korea`s National Pension Service (NPS) from next year will up the share of its investment in offshore stocks to 20 percent, more than what it invests in Korean equities, with an aim to further stretch its overseas stock portfolio to 30 percent by 2023.

NPS, the world`s third-largest pension fund with $579 billion in assets under management (AUM), will maintain its direction toward increased overseas and alternative investments over the next five years as part of its mid-term policy to ensure fund safety and profitability.

The fund said it aims to have around 30 percent of its assets in overseas stocks and about 5 percent in overseas bonds by the end of 2023, up from 17.4 percent and 3.8 percent, respectively, as of end-2017. The increase will come at the expense of reduced investment in local assets.

For next year, the fund’s target asset allocation is 18.0 percent of total AUM for domestic stocks, 20.0 percent for overseas stocks, 45.3 percent for domestic bonds, 4.0 percent for overseas bonds and 12.7 percent for alternative investments.

With the decision, the fund is expected to reach a critical inflection point next year, when overseas stock investments outnumber domestic stock investments for the first time.

The fund has significantly increased its investment in overseas stocks over the past four years, with a portion of 11.6 percent in 2015 and 17.7 percent this year. The investment amount grew more than 50 percent from 69.93 trillion won to 108.27 trillion won in the same period.

The latest decision means the fund could set aside up to 145.5 trillion won to buy overseas stocks next year. In contrast, the fund’s asset allocation for domestic stocks will continue falling with 20 percent in 2016, 18.7 percent in 2018, and 18 percent in 2019. But the actual investment amount is expected to remain almost unchanged at 131 trillion won next year as the pension fund’s AUM continues to increase.

By Yoo Joon-ho and Minu Kim

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