Korea's public pension operators plan to reduce their holdings of bonds and expand investment in riskier destinations such as stocks in a bid to bolster asset management earnings, sources said Thursday.
The move came as returns from bond investment, which accounts for more than half of local public pension operators' assets, are expected to fall down the road as interest rates remain low here.
The central bank froze the key interest rate for the second straight month on Thursday, opting to preserve policy room in the face of global economic uncertainty and the presidential election slated for next week.
The Bank of Korea left the benchmark 7-day repo rate unchanged at 2.75 percent for December after cutting the rate in July and October, which had an adverse impact on returns from bond investment.
"While bond investment accounts for 59 percent of our assets, its return is expected to hover around 3 percent in 2013, falling by half from this year," an official from the Korea Teachers Pension said.
The National Pension Service (NPS), the world's fourth-largest pension fund, which operates 386 trillion won ($360 billion), plans to reduce its portion of bond assets to 60 percent by 2017 from 71.1 percent tallied in end-2011.
Meanwhile, the NPS plans to increase the portion of stocks and alternative investment to 30 percent and 10 percent, respectively, market watchers said. Their portion stood at 25.8 percent and 7.8 percent in end-September. Alternative investment includes safer assets such as property.
"Increasing the portion of riskier assets will allow (pension operators) to payout more returns to subscribers by enhancing expected earnings," said Nam Chae-woo, a researcher at the Korea Capital Market Institute.
Other pension operators such as the Military Mutual Aid Association and Korea Post also plan to reduce their dependency on bond investment, market watchers said. (Yonhap)