S. Korea's National Pension Fund to Resume Invsesting Abroad

S Korean fund to resume investing abroad
By Song Jung-a in Seoul (FT)
Published: May 21 2009 18:40 Last updated: May 21 2009 18:40
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South Korea’s state-run National Pension Service plans to resume overseas investments next month, encouraged by the won’s sharp appreciation against the dollar.
The world’s fifth-largest pension fund, with about $189bn in assets under management, abruptly reversed course on plans to increase its overseas and equities exposure last year due to uncertainties arising from the global financial crisis.
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“Last year, we suspended overseas investments due to the volatility of the Korean won against the dollar,” said Park Hae-choon, chief executive of the pension fund, at a conference in Hong Kong. “Since the won and the dollar have stabilised, those pending investments will be resumed as of June this year.”
The NPS plans to cut bond holdings, overwhelmingly domestic, from more than 80 per cent to 50 per cent of total assets by the end of 2012, more than double equity exposure to 40 per cent and quadruple alternative investments to 10 per cent.
The fund now plans to resume its investment in riskier assets.
The NPS aims to increase its exposure to domestic equities to 17 per cent by the end of this year from 13 per cent.
“The domestic market is not big enough for the pension fund to invest and that’s why we plan to increase overseas investments,” Mr Park said, adding that an investment committee will meet next week to decide where and how much to invest.
The pension fund owns stakes of more than 5 per cent in 107 Korean companies, including Samsung Electronics and Posco.
The Korean stock market has gained 26 per cent this year after dropping more than 40 per cent last year.
Under a joint venture with Oaktree Capital Management, the US private equity fund, NPS is to make matching investments in domestic sectors ranging from infrastructure to real estate.
Oaktree earmarked $3bn for Korean investment. NPS has a similar agreement with Blackstone Group, which has set aside $2bn for South Korea.
The country’s state-run companies and financial groups held back from making big investments abroad in an effort to curb the won’s slide against the dollar last year.
The Korean won dropped about 26 per cent last year against the dollar to become the worst performer among leading Asian currencies.
It has gained about 28 per cent against the dollar since it touched an 11-year low in early March.
Until mid-2008, the NPS was moving toward more aggressive investment in riskier assets to boost returns. But high volatility amid the global crisis forced it back to safer assets.
The fund made a small profit on its assets last year as its focus on bonds protected it from volatile international markets.
Copyright The Financial Times Limited 2009