NPS to raise global stock portion by end-2022

  • 2017-05-26

The National Pension Service (NPS) will further increase the proportion of overseas investment with a higher share of global equities, according to its asset allocation plan for the 2017-2022 period.

Global equities will make up around 25% by end-2022, versus 15.3% at end-2016. In comparison, the proportion of global fixed-income assets will remain steady at around 5% by end-2022, whereas that of domestic fixed incomes will shrink further.

By end-2022, global investment will account for 40%, compared with last year’s 27%, the Ministry of Health and Welfare said in a statement on the NPS’ mid-term asset allocation plan.

NPS’ fund management committee under the ministry endorsed the mid-term allocation plan on May 25.

NPS targets a 5.1% annual return on average for the five-year period, little changed from the 5.0% target set for the 2016-2021 period.

The world’s third-largest pension fund sees its AUM nearly doubling to 1,000 trillion won ($894 billion) by 2023.

Meanwhile, alternatives, including both domestic and overseas assets, will account for “over 10%” of AUM by end-2022.

About whether the target percentage may suggest a slight decline in the share of alternatives from 11.9% by end-2021 and 12.5% by end-2018, an NPS source dismissed such possibility.

“The reason that we put the proportion just at ‘over 10%’ is because we need to review many factors for alternative investment,” Yonhap News quoted an NPS source as saying on May 25.

“Our basic stance is that we will continue to expand alternative investment, in particular, with a focus on global markets,” he told the news agency.

NPS gave no further details on specific asset classes for the 2017-2022 allocation plan.

Meanwhile, NPS is preparing to begin direct investment in emerging Asian market debt, Yonhap Infomax quoted CIO Myoun-Wook Kang as saying in the fund management committee meeting on May 25.

The following are details of NPS’ mid-term asset allocation plan.

End-2016 End-2017 End-2018 End-2021 End-2022
Equities Domestic 18.4% 19.2% 18.7% ±20% ±20%
Overseas 15.3% 15.4% 17.7% ±25% ±25%
Fixed income Domestic 50.7% 49.5% 47.1% ±40% ±40%
Overseas 4.2% 4.0% 4.0% ±5% ±5%
Overseas 27% 26.1% 29.3% over 35% around 40%
Alternatives 11.4% 11.9% 12.5% over 10% over 10%

Source: Ministry of Health and Welfare

Note: Numbers are from the welfare ministry’s statements released in May 2016 and on May 25, 2017.

By Hugh YH Jeong

hugh@hankyung.com

<Edited by Yeonhee Kim>