By Cho Jin-seo
Staff reporter
In defiance of fears of a double-dip recession, South Korea’s national pension fund has announced that it will increase its investment in stocks, real estate and other risky assets next year.
The National Pension Service (NPS), which manages a pot of 300 trillion won ($247 billion), said it will increase the share of equities in its portfolio by 2.9 percentage points to 24.6 percent next year. This means that it will buy 12.3 trillion won ($10.1 billion) in stocks on Korean and foreign stock markets next year.
The Ministry of Health and Welfare approved the 2011 budget and operating plan on Wednesday.
Investment in “alternative assets” such as real estate, private equities, and construction project financing will also rise to 7.8 percent of the total portfolio from this year’s 6.4 percent. To fund this, it will have to unload 10 trillion won ($8.2 billion) worth of government and corporate bonds.
The trend will continue until 2015 so the ratio of bond-equity-other assets becomes 6-3-1. The plan reflects the NPS’ belief that the global economy will continue to grow at a slow, but steady pace next year and beyond.
“The conditions in financial markets in and out of Korea will gradually improve in 2011 in line with the recovery of the global economy, though market volatility will expand,” a report from the ministry said. “Stock prices are expected to have upward momentum on the back of the domestic and global economic recovery. In line with the global economic cycle, there will be a rebalancing of equities in the first half, but the speed of growth will accelerate in the second half.”