NPS to invest 30% in overseas assets by 2020

By Choi Kyong-ae

The National Pension Service (NPS) said Wednesday it will increase the ratio of global assets to more than 30 percent by 2020 mainly to offset declining margins due to low rates.

“We have preferred bonds as investment tools but we are putting a bigger focus on diversifying our portfolio into a wide range of asset categories. It will help contain risks at the portfolio level in the long term,” an official at NPS said.

For the 2016-2020 period, the state-run pension fund will increase its overseas investments in equities, bonds and alternative assets from 21.9 percent at the end of 2014, the NPS said in a statement.

Under its overall portfolio reorganization plan, the NPS plans to increase the ratio of equities to 40 percent by 2020 from 30 percent at the end of 2014, while reducing that of bonds to 50 percent from 60 percent during the same period, the statement said.

As for alternative investments which cite investments in local companies, property and infrastructure projects, the ratio is targeted at more than 10 percent little changed from 9.9 percent, it said.

At the end of February, the NPS was the world's third-biggest national pension fund with 482 trillion won ($436 billion) under its management, after Japan's Government Pension Investment Fund and Norway's Government Pension Fund Global, according to NPS.

“We cannot help looking overseas as the base rate is in decline and the economy does not show signs of recovery in spending,” the NPS official said.

The Bank of Korea is widely expected to cut the benchmark interest rate on Thursday from an already record low of 1.75 percent. The central bank cut the base rate three times since August to help stimulate lackluster spending.