Eyes are on whether South Korea`s National Health Insurance Service (NHIS) would emerge as a big player in the country`s investment market as it is adding more dividend-paying products such as three-year treasury bonds and bond-type funds to its investment portfolio with an aim to boost its returns on a 17 trillion won ($14 billion) fund accumulated from subscribers.

According to the Ministry of Strategy and Finance and the Ministry of Health and Welfare on Tuesday, the public health insurer is changing its conservative investment strategy by putting more money into mid-term funds with up to three-year maturity and reducing investment in short-term funds maturing in less than one year.

The change comes after the fund size has grown sharply since 2011, raising the need to diversify its investment portfolio and to further improve its returns to curb its fund depletion which may start in 2025.

The fund’s accumulated asset reached 16.87 trillion won as of last January.

The NHIS has already jacked up its allocation to mid-term assets to 75 percent late last year from 22 percent in 2012. Its investment portfolio is also changing, with realignment around dividend-paying products, including three-year treasury bills from fixed-rate products like two-year maturity savings accounts.

In contrast, the fund sharply decreased its investment to short-term money market instruments like MMDAs and MMFs from 44 percent in 2012 to 16 percent at the end of last year.

The NHIS decided to add bond-type funds into its portfolio as it believes bond-type funds are an important element in boosting its returns.

However, the health insurance fund was designed to cover short-term reimbursement of medical expenses, meaning its investment target has been restricted to short-term funds with low risks. For this reason, the fund yielded a return of only 2.19 percent last year versus the national pension fund’s 4.57 percent.

By Cheon Chung-hong, Kim Gyu-sik

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