Pension agency lowers expectations

Korea’s National Pension Service (NPS), the nation’s biggest investor, had revised downward its five-year target for investment returns to account for slowing economic growth.

The agency, which had about $359 billion in assets as of March, is targeting returns of 6.1 percent for 2014-18 on its stock, bond and property investments, down from the 6.6 percent goal announced last year for 2013-17, according to a statement released yesterday by the Ministry of Health & Welfare, which oversees the NPS.

The lower target comes after the government cut its forecast for 2013 gross domestic product on March 29 from 3 percent to 2.3 percent. Korea’s Ministry of Strategy and Finance unveiled a $15 billion supplementary budget on April 16 to support exporters against a weaker Japanese yen and revive an economy that grew last year at its slowest pace since 2009.

“The ministry lowered the return target rate on investments because we look at the nation’s GDP and the inflation data when setting the target,” said Baek Hyoung-ki, an official at the ministry’s national pension finance division.

The NPS, which named a new chairman May 24, has been seeking to boost its equity holdings and lower its bond investments to raise returns for its members. Its latest five-year asset allocation plan calls for the pension fund to increase stocks to more than 30 percent of assets by the end of 2018 from 26.7 percent in 2012, according to yesterday’s statement.

The pension service is targeting bonds to take up less than 60 percent of assets by 2018 from 64.8 percent last year. Bonds accounted for 68.7 percent of assets at the end of 2011, while equities represented 23.5 percent.

Central bank data on April 25 showed Korea’s economy grew 0.9 percent in the first quarter, the most in two years, after the government announced its stimulus package. That exceeded the median 0.7 percent estimate of 15 economists surveyed.

Bloomberg