SEOUL (Reuters) – South Korea’s National Pension Service (NPS), manager of the world’s third-largest public pension fund, will allocate 65% of its assets in risky assets under new long-term asset allocation rules, the welfare ministry said on Thursday.
“Going forward, the fund will keep the ratio of risky assets at 65% in its strategic asset allocations and invest in various kinds of alternative assets in a swift manner within the ratio to raise investment earnings,” the ministry said in a statement, after a meeting to review the fund’s investment strategy.
It is a top priority for NPS to raise investment returns and delay the depletion of the fund, currently expected to run out of funds by 2055 due to a fast-ageing population.
The target of 65% was announced as the board governing the fund’s investment policy decided to implement a “reference portfolio”, a new portfolio rule allowing flexible asset allocations within a long-term target ratio.
Until now, the NPS has allocated assets according to its five-year target ratios set for each asset and reviewed on an annual basis.
The ministry said it decided to introduce the new portfolio management rule because the current mechanism restricted the fund’s investments, making it unable to respond to a recent market trend of new investment opportunities.
The NPS held 1,069.7 trillion won ($777.68 billion) in total assets at the end of February, with stocks and alternative assets accounting for 46.7% and 16.0% of assets, respectively. It plans to continue increasing investments abroad and in non-traditional assets to seek higher returns. ($1 = 1,375.5100 won)