S. Korean Gov’t to Raise 7 Pension Funds’ Overseas, Alternative Investment Proportion

South Korean government will gradually raise the overseas and alternative investment proportion of state-run pension funds, such as National Pension Service, Government Employee Pension Service, Teachers’ Pension, by between two to three percentage points every year.

The Ministry of Strategy and Finance held the second 7 state-run pension funds management policy meeting on July 29 and decided to increase the proportion of state-run pension funds’ investment in overseas and alternative investment. The meeting was presided by the Second Deputy Minister of Strategy and Finance Song Un-suk. The 7 state-run pension funds management policy meeting was launched in March to promote the financial soundness of state-fund management institutions.

Under the new pension funds investment plan, National Pension Service, the country’s biggest institutional investor, will revise its investment portfolio to raise the proportion earmarked for overseas and alternative investments to 31.3 percent next year from current 28.6 percent. Government Employee Pension Service will also increase the overseas and alternative investment portion to 35.9 percent from 33.7 percent while Teachers’ Pension will up the portion to 36.6 percent next year from 33.8 percent this year. A gradual increase in overseas and alternative investments, which have relatively higher returns, is inevitable to prevent the depletion of funds which are rapidly draining away due to low birth rates and aging society. Moreover, National Pension Service plans to boost the overseas and alternative investment proportion to 40 percent by 2021, while Government Employee Pension Service will also up the portion to around 44 percent in five years.

To this end, the 7 state-run pension funds asset management council will share investment information and strategy, expand networks among asset management workforce and develop joint investment opportunities. It will also set up and carry out plans to expand overseas and alternative investments of Korea Workers’ Compensation and Welfare Service and Military Pension Fund by the end of the year.

However, the government will also expand the participation rates of external specialists to add more security to the high-risk high-return investment.