South Korea's National Pension Fund, Seoul, reiterated a target to boost its allocation for equities in the next five years, as it seeks to increase investments in an asset class that outperformed bonds last year.
The fund, which is managed by the National Pension Service, aims to have at least 30% of assets in stock by the end of 2016, the same target announced for the end of 2015 a year ago, according to an e-mail Friday from the Ministry of Health and Welfare. The fund had 23.2% of assets in equities at the end of December. Domestic bonds will make up less than 60% of assets by the end of 2016, compared with 66.9% as of Dec. 31. The fund updates five-year targets annually.
South Korea's benchmark seven-day repurchase rate is at 3%, even after the central bank increased it by a quarter of a percentage point in January and March to curb rising prices. Government bonds returned 8.28% last year, according to a local-currency bond index compiled by HSBC Holdings. The Kospi index, the benchmark stock gauge, jumped 22% in 2010.
The fund, which had 339 trillion won ($314 billion) of assets at the end of April, is targeting a return of 6.5% for five years to 2016 and forecasts increasing assets to 565 trillion won. It reported in February a preliminary return of 10% for last year.
Domestic equities may increase to at least 20% of assets by the end of 2016, from 17% at the end of last year, the statement said. Overseas stocks will account for at least 10% vs. 2010's 6.2%. Overseas bonds will account for less than 10%, from last year's 4.1%.
Investments in assets other than bonds or stocks will climb to at least 10% from last year's 5.8%.
“We plan to continue to diversify to ensure stable management of funds by boosting overseas and alternative investments,” the ministry said.
National Pension said in October it bought a stake in Colonial Pipeline Co., operator of the largest pipeline linking U.S. Gulf Coast refiners and East Coast markets, to diversify its assets. Overseas investments include a shopping mall near Paris, Berlin's Sony Center, London's Gatwick Airport, an office building in Sydney, and HSBC Holdings' London headquarters.
The fund was set up in 1988 to manage pensions for private-sector employees and the self-employed.