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Korea's NPS to ramp up foreign allocation to 55% by 2025, report says

By Hui Ching-hoo   
August 4, 2020

South Korea’s National Pension Service (NPS), the world’s third largest pension fund, aims to boost its assets to over 1,000 trillion won (US$840 billion) and allocate 55% to foreign investments by 2025 in order to maximise profits, according to a local news report, quoting Health Minister Park Neung-hoo.

The planned move comes after the NPS nearly doubled its foreign asset allocation to 34% between 2015 and 2019. Annualised return on the assets over that period was 10.06%, three times the return from domestic investments.

Mr. Park, whose ministry oversees the NPS, outlined the long-term strategies to reporters after the fund’s committee meeting last week, saying that the NPS should develop “effective investment strategies” to maximise profits amid financial market uncertainties caused by the coronavirus crisis, The Korea Herald says in a report on July 31.

He says the target is to increase the NPS’s assets from 725 trillion won as of this April to more than 1,000 trillion won within four years, with 50% invested in foreign markets by the end of 2024, and 55% by 2025.

He says this is for risk hedging and operational stability because the NPS’s liquidity is expected to rise over the next decade with increased pension contributions.

South Korean employees have to currently contribute 4.5% of their monthly income to the NPS.

The report says the pension fund set up a dedicated task force last October for increasing investments in foreign stocks and bonds.

Spokespersons for the NPS did not immediately respond to questions from Asia Asset Management.