``Looking for Better Returns…``; Emergency for Finding Better Investment Institutions

Due to the extremely low interest rates, various pension, funds and scholarship management institutions are in emergency, including National Pension Corporation (NPC) and Employment Insurance Funds (EIF). In some scholarship foundations, they are reducing the amount of scholarships or the number of recipients.

Since the profits from domestic savings, stocks and bonds, have been reduced, the institutions or foundations are looking for better returns through foreign investment or waging a fundraising campaign. Nevertheless, nothing has advanced so far. Some people are worried about the potential insolvent investment in that the risky high-profit investments are being sought for compensating the fund losses.

NPC, whose fund is 68.8 trillion won, invests 27 trillion won into bonds. An official of Ministry of Health and Welfare (MOHW) said, ``In the past, 6 percent of the NPC fund was invested into stock market. However, considering the bond returns have dropped now, there are opinions to increase the stock market investments up to 20 percent. As the domestic stock market is unstable, foreign markets are being considered for investment.`` So far, the NPC funds were invested only to blue chips (Grade A), but the portfolio may be expanded for better profits down to Grade BBB, which is the poorest investment-grade.

EIF have invested half of its 4.6 trillion won fund to banking business so far. Since the interest rates became low, they are looking for better investment institutions. Yoo Byung-Han, an official of Ministry of Labor, said, ``To get better returns, the second priority bonds of money in trust are being considered.``

Korea Teachers Cooperative Foundation (KTCF) have invested 70 percent of its 7.5 trillion won fund to bonds, but they decided to invest the fund onto social overhead capital (SOC) bonds, including Inchon Cheolma Tunnel Construction because such investments are not only safer than stock markets but also are expected to get more than 10 percent returns.

As the profits are reducing, some projects are being downsized. Culture and Arts Foundation lowered next year`s budget to 36 billion won, which may not be equal even to half of this year`s budget of 75.7 billion won. That`s because most of their 396 billion won were deposited into banks where the returns dropped from 12 percent of the early last year to 5 percent.

Korea Woman Foundation had waged a project for helping women in alienated class but they are planning to downsize the project because of the lack of the fund. Seoul National University will reduce the number of scholarship recipients or the amounts of scholarships, while Sungkyunkwan University, who had supported 12 students, will support 6 students this year, and 4 students the following year.

Professor Yoon, Kunyoung, Department of Economics of Yonsei University, said, ``The investments of pension and funds should be carefully sought based on long-term profits and risk factors. If high profits are pursued in order to avoid short-term low returns, this may be exposed to more dangerous situation.``

larosa@donga.com