Nat`l Pension Service Suffers $5.2 Bln in Losses

The National Pension Service lost more than six trillion won (5.2 billion U.S. dollars) in the first seven months of this year, a report said yesterday.

In July alone, losses reached 1.8 trillion won in its stock investments, with profitability turning negative.

A report given to ruling Grand National Party lawmaker Yu Il-ho said the pension agency lost 6.0697 trillion won in stock investments (return of minus 14.43 percent) between January and July.

In July, its loss surged by 1.805 trillion won from June. The agency’s debt structure consists of losses from domestic stocks amounting to 4.9806 trillion won (4.3 billion dollars) with a return of minus 14.39 percent, and losses from foreign stocks amounting to 1.0891 trillion won (958.7 million dollars) with a return of minus 14.61 percent.

The agency earned profit of 5.57 trillion won (4.88 billion dollars) in its bond investments, but as its losses snowballed due to the falling stock investment, its return was minus 0.13 percent in July.

With the stock markets at home and abroad plunging over the past two months and the pension agency’s investment in Lehman Brothers, which filed for bankruptcy, the annualized return could also turn negative.

National Pension Service CEO Park Hae-chun decided to increase the share of stocks in the agency’s portfolio to 40 percent by 2012, leading some experts to question the stability of the corporation’s asset management.

At the National Assembly, Health, Welfare and Family Affairs Minister Jeon Jae-hee said, “We think CEO Park has stressed profitability, so we strongly urged him to pursue profitability as long as he can maintain stability.”

The agency invests 17.7 percent of its assets of 228.9 trillion won (200.7 billion dollars) in stocks and the remaining 78.6 percent in bonds.

According to reports, the national teachers’ pension between January and last month lost 267.4 billion won (234.6 million dollars) with a return of minus 20.4 percent in its stock investments, and the Military Pension Managing Agency lost four billion won (3.5 million dollars) with a return of minus 19.22 percent in stock investments.

The Government Employees Pension Service, which recently asked the government to provide 2.05 trillion won (1.79 billion dollars) to cover its investment deficit, had a loss of 199 billion won (174.6 million dollars) for a return of minus 23.8 percent over the same period. This was the biggest negative return on stock investment among pension funds.

koh@donga.com