Korea’s pension funds, led by the National Pension Service, are planning to increase investments in overseas and alternative assets, government officials announced last week.
Korea’s JoongAng Daily reported that Health and Welfare Minister Jeon Jae-hee stated that the national pension fund is planning to double the amount of overseas investments, which included equities, bonds and property, to more than 20 percent of its portfolio by 2015.
Jeon also noted the need to diversify holdings from such traditional investments as stocks, bonds and property to alternative investments, which include private equity funds and commodities.
This is a growing trend among Korean pension funds, which are seeking higher returns on investments to meet the increased costs of Korea’s rapidly aging society.
Jeon outlined the plans at a seminar, Countermeasures for Job Creation and the Aging Society, held by the Presidential Council for Future & Vision, the Ministry of Health and Welfare and the Financial Services Commission.
Korean regulators are now considering plans to deregulate rules on corporate pensions to allow them to invest in more kinds of assets as pension funds in other Asian countries increase overseas investments.
About the National Pension Fund –
The National Pension Fund was established to serve as a reserve fund to secure the finances necessary for the National Pension services and to finance the pension benefits for the insured.
With the goal of – “to gain the long-term stability and provide sustainable real values of the Fund by Developing the “Mid- and Long-Term Fund Management Plan” which helps generate stable real values of the reserve and contributes to the national economy as well.”
NPS & Alternative Assets -
As at the end of May 2010, the NPS had KRW 292 trillion (U$240 billion) in assets, of this amount KRW 14 trillion is invested in alternative assets, such as infrastructure, real estate, corporate restructuring funds, private equity, and venture capital.
The amount invested in alternative asset classes has steadily increased from 1.1% of the total portfolio value in 2006 to 4.5% as at the end of 2009. According to the NPS the goal is increase this to above 10% by 2014.
For alternative asset investing the NPS have partnerships with 22 asset managers, including Bain Capital, Blackstone, Carlyle, CVC, KKR, Silver Lake, Oaktree, TPG, Alinda, BlackRock, Carlyle, JP Morgan, & Morgan Stanley.
Sources: NPS website, JoongAng Daily
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