South Korea’s National Pension Service, Seoul, plans to spend a net 7.4 trillion won ($6.9 billion) boosting its domestic equity allocation next year as it continues to diversify assets.
The nation’s biggest investor will increase the weighting for local stocks to 19.3% of assets in 2012 from 18% planned this year, and lower the weighting for domestic bonds, the Ministry of Health and Welfare, which oversees the fund, said in an e-mailed statement Wednesday. On June 3, it kept a five-year target to boost equities to at least 30% of assets by the end of 2016.
The Korean fund plans to have 8.1% of assets in overseas equities next year, compared with 6.6% targeted for 2011, the ministry said. The fund’s size is expected to grow to 397 trillion won by the end of 2012 from 360 trillion won estimated for the end of 2011, it said.
The fund aims to pare its domestic bond weighting to 59.3% in 2012 from 63.5% estimated for this year, the welfare ministry said. The service will keep its overseas bonds allocation target at 4.1% of assets next year.
The pension fund is boosting investment in equities even as South Korean government bonds returned 2.5% this year through June 28, according to a local-currency bond index compiled by HSBC Holdings, outpacing a 0.6% gain in the benchmark Kospi Index as uncertainties over Europe’s debt crisis and the strength of the global economy prompted investors to favor less risky assets.
“We’ll continue to stick to our fund management direction to diversify assets and to boost overseas investments,” according to Wednesday’s statement by the ministry.
The Korean pension fund also plans to increase its weighting of so-called alternative investments to 9.2% of assets in 2012 from 7.8% estimated for this year, according to the ministry.