National Pension Service, South Korea’s biggest institutional investor, will increase its investments in overseas assets to 35 percent of its total investment by 2021 to improve an investment return through portfolio diversification. It also targets to achieve a return of 5 percent on its investment over five years starting 2017.

NPS fund management committee on Monday decided to raise the allocation of combined overseas assets - foreign stocks, bonds and alternative assets - in its investment portfolio to 35.0 percent of its total investment by 2021 from 24.3 percent as of the end of 2015.

According to its 2017-2021 investment plan, the world’s third-largest pension fund plans to add 24.5 percent of foreign stocks, 4.0 percent of foreign bonds and 14.0 percent of alternative assets. The share of local investments will decrease to below 65 percent by the end of 2021 from 75.7 percent as of the end of 2015. Its investment in the local stocks will also drop from 18.6 percent to 17.5 percent over the cited period.

NPS is expected to invest total 323.4 trillion won in foreign stocks, bonds and alternative assets by 2021, up a whopping 200 trillion won from 124.2 trillion won as of the end of 2015. The Ministry of Strategy and Finance estimated that total assets managed by NPS would reach 924 trillion won in 2021, up 412 trillion won from 512 trillion won as of the end of 2015.

The new plan is aimed at boosting the rate of return, according to industry observers. The NPS reaped a meager 1.7 percent return from its investment in local stocks at the end of last year, 2.2 percentage points lower than the benchmark. Domestic front won’t likely improve this year. The return from local shares as of February went into negative territory, sliding to -1.5 percent. On the contrary, the return from overseas shares reached 5.7 percent at the end of last year, 1.5 percentage points higher than the reference.

The national pension fund sets its target return for the new mid-to-long term investment plan at 5 percent, down 0.5 percentage point from 5.5 percent of last year’s goal, reflecting the slump in the domestic and global economy and inflation rising at a snail’s pace.

By Chun Jung-hong

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