South Korea's National Pension Service, the nation's biggest investor, plans to allocate more funds to overseas equities as it seeks to boost returns.
The Seoul-based agency, which had 406 trillion won ($360 billion) in assets as of March, will raise the weighting of overseas stocks to 10.5% of its assets in 2014, the Ministry of Health & Welfare, which oversees the NPS, said in a statement Friday. That compares with the 2013 target of 9.3%. The pension fund is keeping its target for domestic equities unchanged at 20% and aims to pare domestic bond holdings to 54.2% of assets next year from 56.1% targeted for 2013.
“It's inevitable for us to turn to overseas stocks for higher profits as we're unable to actively invest in domestic equities because we possess” a 6% stake of the domestic stock market already, said Lee Hyung Hoon, director of the national pension fund policy division at the health ministry.
The NPS aims to raise the proportion of alternative investments, including infrastructure, property and private equity, to 11.3% of assets in 2014, according to Friday's statement. That's up from the 10.6% objective for this year. The pension fund plans to keep its target for overseas bonds unchanged at 4%.
The South Korean pension fund's latest five-year asset allocation plan calls for the agency to increase stocks to more than 30% of assets by the end of 2018 from 26.7% in 2012, according to a May 29 statement from the ministry. The pension fund is targeting returns on stock, bond and property investments of 6.1% for 2014-2018, down from 6.6% announced last year for 2013-2017, according to that statement.
The NPS is targeting bonds to make up less than 60% of assets by 2018 from 64.8% last year, the May statement showed.