Pension Fund to Invest W20 Tril. in Resources Development Abroad
By Yoon Ja-young
Staff Reporter
The National Pension Fund (NPF) said it will invest 20 trillion won ($21.5 billion) in the development of overseas oil, gas and minerals over the next 10 years, the latest in a series of moves to expand its investment returns.
The National Pension, which sits on a pool of more than 200 trillion won of money paid by the people, has been under growing pressure to expand the returns of its assets under management. With aging Korean people, the fund is expected to see its assets deplete in the coming years if it fails to come up with more drastic steps to boost its investment returns.
Against this backdrop, the NPF has signed investment contracts with three state-run energy and mineral developers _ Korea National Oil Corp. (KNOC), Korea Gas Corp (KGC) and Korea Resources Corp. (KRC).
The deal is expected to ignite resource development projects that have been stagnant due to a lack of funds.
``The deal reflects our commitment to boosting our investment returns. We have long invested in bonds and stocks, but that's not enough to generate the level of profits needed,'' NPF President Kim Ho-shik said.
Taking into account the 20 trillion won committed by the NPF and other funds to be shared by state-run and private consortiums, South Korea's investment in overseas resources development is expected to reach as high as 70 trillion won over the next 10 years.
High Risk, High Return
The fund currently has 224 trillion won under its management as of November, and if it does not change its investment patterns to more efficient and aggressive ones, it is expected to remain profitable only till around 2050, after which it could spend more to provide pension coverage than it can collect.
Kim said that the money could be injected into projects that promise to yield the best results with minimum risks. He identified such promising areas as gas and oil fields, and mines that are already in operation.
For its part, KNOC CEO Hwang, Doo-Yul said there are many modest-sized operational fields worth about $2.5-3.5 billion apiece. He said investment by the fund could make it easier to buy or secure holdings in these companies.
Initially, the NPF and its partners will invest in existing oil fields and oil developers, and gradually expand into direct investment in riskier resources development.
Analysts have called for the fund to invest in the new projects and increase investment in global stocks for stronger results.
The projected investment in new resources development is expected to help the resources-poor country Korea raise its self-sufficiency rate, currently hovering at about 3.8 percent for oil and gas. The government is seeking to raise the rate to 28 percent by 2016, while setting a target of 38 percent for other imported minerals.