Three Pension Funds Lost Stock Investment

The three major state pension funds including the national pension, civil servant`s pension and private school workers` pension have been found that they lost their investments, worth of 697.7 billion won, in stocks from 2000 into June this year.

A data on portfolio managements in the three pension funds presented Monday by Grand National Party lawmaker Lee Han-gu showed that the national pension lost 536.2 billion won in its stock investment, civil servant’s pension 131 billion won, and private school workers’ pension 30.5 billion won, respectively, during the same period. Their average earning rates were a negative 10.5 percent.

In response, the national pension said that after taking a severe bettering from its stock investment, it has improved its portfolio management system by allowing a third party to manage a part of its investment since July in 2001 and since then it has posted higher earnings than the average market values.

Meanwhile, GNP lawmaker Lee criticized a government and ruling party-led plan to fully allow pension funds’ investment in real estate and stock markets citing negative impacts the plan might have on, such as unsound financial situation to pension funds.

Rep. Lee expressed his concern that if the pension act is revised according to the government and the ruling party line, a part of pension funds will be diverted to finance government’s pet projects that will be carried out with political considerations without the approval of the parliament.

He added that if the provision that allows the parliament to review the management of pension funds is removed as the government and the ruling party want to do, it is likely that pension funds` stock investment will be made arbitrarily. To fend off those side effects, the parliamentary special committee for financial reforms needs to work on a new measure for the management of pension funds, he maintained.

Myoung-Gun Lee gun43@donga.com