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| The headquarters of the National Pension Service (NPS) in Jeonju, North Jeolla Province / Courtesy of the NPS |
NPS' long-term strategy is to diversify portfolio and increase rate of return
By Anna J. Park
The National Pension Service (NPS), the largest institutional investor in Korea with a net asset size of 948 trillion won ($725 billion) as of the end of last year, has lowered the number of shares it holds of Samsung Electronics, while increasing its stake in Taiwanese semiconductor company TSMC.
According to the public disclosure information released by the pension service provider, the NPS holds an 8.52-percent stake in Samsung Electronics, as of the end of last year. It is the lowest stake since 2018, when the Korea-headquartered global chipmaker conducted a stock split of 50:1.
The NPS had maintained over a 10-percent stake in Samsung Electronics during the past years until the end of 2020, when the national pension agency held a 10.69-percent stake in the blue-chip stock.
Yet, the NPS sold a significant portion of its Samsung shares throughout year 2021, when the stock's price enjoyed a rally, particularly in the first half of last year.
As a result, NPS' stake in Samsung Electronics shrank to 8.52 percent at the end of last year, more than a two percentage point decrease of the national pension agency's stake in the company in just a year. With the sharp fall of the stake, the total value of Samsung shares owned by the NPS also plunged by 11.1 trillion won, from 52.3 trillion won at the end of 2020 to 41.1 trillion won in 2021.
While the NPS reduced its ownership stake in Samsung last year, its stake in TSMC, the Taiwanese semiconductor manufacturer and Samsung's main competitor in the global foundry market, has increased to 0.29 percent at the end of 2021, a 0.04-percentage point increase from the previous year's 0.25 percent. Meanwhile, the NPS' stake in NVIDIA, the largest semiconductor company in the world headquartered in the U.S., has remained the same, at 0.29 percent, during the past two years.
The NPS explained that the decrease in the pension provider's ownership of Samsung stocks and the increase ― or at least maintenance of its previous stake as seen in the NVIDIA case ― of the stakes in overseas companies are largely attributed to the pension agency's long-term strategic investment plans.
"Basically, the NPS is moving in the direction of decreasing the weight of local stocks in its portfolio, while expanding its ownership of overseas stocks, as the pension service agency seeks to diversify its investment portfolio according to its long-term strategic plans," an official from the NPS told The Korea Times, Tuesday.
"The core stance of the NPS' investment allocation plan lies in portfolio diversification, as it aims to reduce risks while increase the rate of investment returns," the official added, explaining that the NPS follows the decisions and long-term strategies set by its fund operation committee.
Under the target profit rate of 5.4 percent during the next five years, the NPS plans to invest 16.3 percent of its entire funds into local stocks, while investing 27.8 percent of them into overseas stocks. Last year alone, the NPS recorded a high rate of return of 29.77 percent from overseas stocks, while it earned only 10.7 percent in profits from local stocks.
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