World’s 4th Largest Pension Fund To Cut Alternatives, Load Up On Domestic Equities


The South Korean National Pension Service (NPS), which manages $500 billion of assets, announced plans to reduce its alternatives, real estate and infrastructure investments to make way for a big increase in allocation to local stocks.

From Chief Investment Officer:

Next year, the NPS will build up its holding of local stocks to more than KRW 100 trillion (US$93 billion), around a fifth of its entire portfolio, according to a paper submitted the country’s National Assembly, the Korea Times reported.

This shift would move 16 percentage points more of its overall portfolio into equities. An additional KRW 60 billion would be held in foreign stocks while real estate and infrastructure allocations are to be reduced, the newspaper said, in order to build equity exposure.

The fund—which receives significant annual cash inflows—said it would also bring down its new spending on both international and local fixed income products.

However, last year, CEO Choi Kwang said he intended to boost the fund’s allocation to overseas assets to 30% over the next five years.

“NPS is working to overcome the limitations of the Korean market,” the annual report stated. “NPS is gradually expanding overseas investments in consideration with its role concerning incumbent effects on foreign exchange markets. It is also sharpening its in-house fund management capabilities through strategic alliances with other pension funds and global asset management companies.”

So far this year, the Korea Stock Exchange’s KOSPI Index is down 4.31%. Over a 12-month period, it is down 3.77%.

NPS’ is planning to allocate 20 percent of its portfolio to domestic stocks; if that target is reached, it would be its largest allocation ever towards local equities.

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