National Pension Service to Invest More in Stocks

The National Pension Service will increase the share of its high-risk, high-yield investment including stocks and resources to 50 percent by 2012. It has mainly invested in low-risk and low-yield bonds.

It intends to postpone the day when the fund dries up and provide more stable pension service for subscribers. However, more problems may result if its investment is not successful.

At a press conference Tuesday NPS President Park Hae-choon said, “As of late June, we invested 18 percent of the fund in stocks. We’ll increase the share to 40 percent by late 2012. At the same time, the share of bonds will fall to 50 percent from the current 80 percent.” As of late June, the NPS invested 31.9 trillion won (14 percent) in Korean stocks and 9 trillion won (4 percent) in overseas stocks, out of 227.6 trillion won.

The fund is expected to reach 400 trillion won by 2012. Given that, the NPS will invest 160 trillion won in stocks for the year. As long as the value of Korean stocks remains at the current level, an additional 120 trillion won will be injected into local and overseas stock markets over the next four years.

The NPS will also increase the share of alternative investment destinations including property, social overhead capital, and projects to develop overseas energy resources from 2.5 percent to 10 percent over the same period. In addition, it will raise the share of its overseas investment to 20 percent.

It has decided to invest in state-owned financial institutions, which will be privatized including Woori Financial Group and Korea Development Bank, and state-owned firms that have passed through restructuring such as Daewoo Shipbuilding & Marine Engineering and Hynix Semiconductor.

However, some experts have been concerned over rapid growth in the share of stock investment since global stock prices have fluctuated due to financial uncertainties. The NPS has suffered a loss of 10.7 percent in its stock investment due to slowdown in the global stock market.

jarrett@donga.com