Amid worsening profit, NPS to raise overseas investment
The National Pension Service (NPS) will increase its focus on overseas investments, raising its spending on overseas assets to 50 percent of its total investments, Health and Welfare Minister Park Neung-hoo said Friday.
“We need to (improve) the fund’s long-term stability by expanding foreign investment because it provides higher returns than domestic investment,” Park told reporters after holding a meeting of the NPS fund management committee.
The NPS has long been asked to diversify its investment portfolio beyond its heavy exposure in local assets, amid the decrease in the working-age population and the growing number of pension beneficiaries. While stocks and other “alternative assets” are viewed as riskier assets, the NPS was pressured to invest in them as they may bring better returns.
“We need to maximize revenue from the upcoming investments, and contribute to stabilizing the fund,” he said.
The share of its investments overseas reached 35 percent in 2019, but the NPS stated that the figure will rise to 50 percent by the end of 2024. This will also top 55 percent in 2025, according to the NPS.
It is estimated that by 2024, the pension fund of the NPS will be worth 1,000 trillion won.
“With the scale of the fund expanding, it is inevitable for us to expand overseas investments to overcome the shortcomings of domestic investment and disperse potential risks,” Park said.
The minister expects the pension to reap more in insurance income than it will pay in expenditures for the next decade, so he underlined the need to engage in aggressive investment to ensure the fund’s longer-term stability.
In accordance with the adjusted portfolio management, the NPS shared a plan to divide foreign bonds into two categories of investment — stable assets and profitable assets.
For the stable investments, it will focus on purchasing national bonds from developed countries, while at the same time ensure profits by investing in bonds in emerging markets.
The committee also said it plans to secure optimal investment opportunities in alternative investment by forming strategic alliances with global asset management firms and major pension funds from other countries.
The NPS will continue developing investment strategies amid virus-induced financial market uncertainties here and abroad, according to Park.