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Pension fund eyes local stocks
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‘A preliminary tally showed our investment return for last year exceeded 10 percent, and our pension pool is also expected to hit 300 trillion won around October this year.’
January 19, 2010
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Jun Kwang-woo |
Korea’s national pension fund is expected to invest an additional 13 trillion won ($11.5 billion) in local stocks throughout this year, and will invest more on real estate properties abroad including Britain, according to Jun Kwang-woo, chairman of the pension fund.
Jun, a former head of Seoul’s top financial regulator agency, stressed the pension fund will also pick more treasuries in progressive economies such as Australia and will take a more active role in overseas energy and commodity exploration projects.
“A preliminary tally showed our investment return for last year exceeded 10 percent, and our pension pool is also expected to hit 300 trillion won around October this year,” from 278 trillion won as of late last year, Jun said in an exclusive interview with JoongAng Ilbo.
If the preliminary tally turns out to be correct, it will be the first time for the pension fund to post an annual return of more than 10 percent in a decade.
“We will expand investments in three areas - local stocks, overseas investment and alternative investment in properties and natural resources,” said Jun. Korea’s pension fund has long taken a rather conservative approach in managing its massive funds by largely investing in fixed-income securities such as treasuries. But Jun indicated he would ease such a conservative posture a bit, by expanding the fund’s investments in equity markets and other areas that the fund previously had deemed too risky.
“We are planning to invest about 16.6 percent of our fund pool on local stocks, up from 13 percent as of late last year, which means we will be investing an extra 13 trillion won on stocks,” said Jun. The fund has already pledged about 5 percent of its investment pool to invest in foreign equities, meaning the total presence of stocks in its portfolio would exceed 20 percent by the end of this year.
Jun also said the pension fund is additionally eyeing local companies that may be posted for sale by cash-squeezed mother groups during the state-forced corporate restructuring drive.
The Korean government has intensified pressures on local business groups that have little chance of survival even with the state aid. Now such companies are forced by their creditor banks to sell their assets and unprofitable subsidiaries and take other drastic restructuring measures to stay afloat.
“We will also target state-controlled companies that will soon be posted for a sale for privatization,” he said.
Jun stressed the pension fund will finalize such an investment plan once the government lays out a clear indication of how it will sell its controlling stake in Woori Finance Holdings.
Jun also said the fund may snap up more energy and metal shares in overseas stock markets, or invest in metal and energy exploration projects themselves.
The talks to buy additional properties in Britain are currently underway, he said. The pension fund purchased three building properties in London, including the landmark HSBC Tower, last year.
By Shin Sung-shik, Jung Ha-won [hawon@joongang.co.kr]
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