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IT, bio Kosdaq shares to benefit from National Pension Service investment
NPS CEO Kim Yong-jin / Korea Times file
By Lee Kyung-min
By Lee Kyung-min
The portfolio of the National Pension Service (NPS), the world's third-largest pension fund with assets of over 883 trillion won ($769 billion) under management, will be expanded to add 50 companies listed on the Kosdaq, Korea's tech-heavy secondary stock market, industry sources said Monday.
This is part of the pension fund's efforts to introduce a new benchmark and diversify an investment portfolio long criticized as placing too much weight on leading, large-cap shares on the benchmark Kospi, despite booming tech industries that are being increasingly recognized by global investors.
A benchmark in finance terminology is an index followed by institutional investors when they set a target yield, functioning as a basket of shares to be chosen by fund managers for a certain minimum amount of profit. When the new benchmark will be applied has not been decided yet.
The investment in the 50 companies to be added will not be managed by the pension fund, but by asset and fund managers it selects.
But the expansion into the small-cap market bodes well for the country's IT and bio shares, whose prices have increased sharply backed by the continued development of smart technologies due to rising demand for online services, and vaccines brought on by the COVID-19 pandemic.
Apart from the Kosdaq firms, 50 Kospi-listed companies will be added to the portfolio under the direct management of the NPS.
IT and bio shares stand to benefit significantly from the new investment depending on how thoroughly they have adopted environmental, social and governance (ESG) values to become more attractive to investment.
Domestic assets held by the pension fund stood at 178 trillion won as of April, accounting for 20.1 percent of its total assets.
The pension fund reported an annual yield of 9.58 percent last year, its second-highest return following 11.34 percent in 2019.
The equity market is expected to report a strong performance in the months to come well through next year, enabled by a record-low interest rate as part of expansionary monetary policies due to the pandemic.
Most of the cheap liquidity found its way into the stock and real estate markets. The benchmark Kospi exceeded the 3,300-mark on June 25 for the first time ever. This came only about six months after surpassing the 3,000-mark.
Optimists say the index will soar to a high of 3,700 in the second half of the year, driven by scheduled initial public offerings of major firms.
The NPS was unavailable for comment.