South Korean government will raise state-run pension funds’ overseas and alternative investment proportion by between two to three percentage points next year with an aim to secure higher returns amid the concerns over depleted funds as the country is rapidly becoming an aged society.

The Ministry of Strategy and Finance on Friday held the state-run pension funds management policy meeting and decided on upping the proportion of state-run pension funds’ investment in overseas and alternative investment. The state-run pension funds management policy meeting, which was launched in March to promote financial health at state-fund management institutions, was attended by heads of pension funds operators including National Pension Service, Government Employee Pension Service, Teachers’ Pension, National Health Insurance Service, and Korea Workers’ Compensation and Welfare Service.

Under the new pension funds investment plan, National Pension Service 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.

Moreover, National Pension Service, the country’s biggest institutional investor, 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. The both state-fund operators will each employ a real-time risk management system to prepare against high risks that often accompany high-return investments. Teachers’ Pension will invite more external experts to enhance its risk management committee’s expertise while the smaller pensions such as employee pension and veterans’ pension will come up with a detailed plan on increasing the portion of overseas and alternative investment within this year.

A gradual increase in overseas and alternative investments is inevitable to secure higher returns on investments when considering the current financial market, said Song Eon-seok, strategy and finance vice minister, adding that the government will also implement preventive measures in parallel to add more security to the high-risk high-return investment.

By Kim Gyu-sik

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