By Na Jeong-ju
Staff Reporter
The National Pension Service (NPS) plans to increase its investment in stocks to 124 trillion won by 2012 from the current 38 trillion won, while decreasing investments in bonds, to achieve higher returns, the state pension manager said.
This year, the firm will invest 17 percent of its pension reserves of 250 trillion won in Korean stocks and 6.8 percent in overseas stocks. It will increase these to 20 percent in Korean stocks and 10 percent in overseas stocks by the end of 2012.
``We are ready to take risks for higher returns,'' NPS President Kim Ho-shik told reporters Thursday. ``We will continue to raise our stock investments and participate in merger and acquisition deals.''
The portion of bond investment will be cut to 50 percent from the current 80 percent, and the money will be used for investment in stocks, real estate and infrastructure, he said.
Kim showed interest in buying shares of the Korea Development Bank (KDB) and Woori Financial Group. The government is now mapping out plans to privatize the state-owned lenders.
``We will make decisions (on whether to invest in KDB and Woori) as soon as the government announces the concrete schedule for stake sales,'' Kim said.
The NPS has called for the need to increase stock investments to diversify its investment portfolio. The focus shift is aimed at ensuring annuity payments to retirees, especially at a time when Korea is rapidly becoming an ageing society, it said.
The Ministry of Strategy and Finance is now seeking to revise rules to promote equity investments by the NPS and enable it to invest in banks and other types of financial firms.
Woori Chairman Bahk Byong-won earlier said he is eager to draw investment from the NPS for managerial stability, but private firms have opposed NPS participation in the sale, saying it is absurd for a state pension fund to invest in a state bank.
The NPS hopes it will be able to become a strategic investor in blue-chip financial firms. Critics have raised questions about whether the NPS has the ability to manage financial firms effectively and whether it has the skill and technique to compete with global financial firms.
Some policymakers, however, say pension funds are the best option to prevent takeover bids by foreign banks as Korean conglomerates are banned from owning more than 10 percent of stakes in banks by law.