Easing rule may spur NPS to invest

Relaxing disclosure requirements will probably spur Korea’s biggest pension fund to increase shareholdings in some local companies, the head of the fund’s investment strategy division said.

The National Pension Service may boost stakes in some stocks above the 10 percent threshold that requires government institutions to report positions, Yoon Young-mok, head of the NPS strategy unit in Seoul, said on Monday.

The new rule, scheduled to take effect Aug. 29, lengthens the timing of disclosures to once a quarter from within five days of the last transaction, according to a draft of the law posted on the Ministry of Government Legislation’s Web site.

The existing disclosure requirements had made it difficult for the fund to make some “strategic” changes to its holdings, Yoon said last month. The fund, which holds about 6 percent of publicly traded shares in Korea, is the biggest investor in the nation’s $1.1 trillion stock market, Yoon said. It owns at least 6.1 percent of SK Telecom, Mando Corporation and Hyundai Motor, according to an April 9 regulatory filing.

“There are certain companies that we need to acquire more than 10 percent of,” Yoon said, declining to name specific stocks. The NPS had 408 trillion won ($366 billion) in assets as of April.

The revised bill, which is being reviewed by the Ministry of Government Legislation, will need to be passed at meetings of the nation’s vice ministers and cabinet before taking effect next month, according to a statement by the Financial Services Commission released June 13.

The new rule is a “backward step” to international investors in terms of market transparency, said Julian Mayo, the London-based co-chief investment officer at Charlemagne Capital, which oversees $2.7 billion.

“Five days sounds reasonable, while every quarter does not,” Mayo wrote in a July 29 e-mail. “Someone could buy 10 percent of a company on July 1, and then add to it, and not disclose until Sept. 30.”

The NPS will raise the weighting of overseas stocks to 10.5 percent of assets in 2014 from 9.3 percent targeted for this year, the Ministry of Health and Welfare, which oversees the NPS, said in a June statement.

The representation for domestic equities will be left unchanged at 20 percent.

The new disclosure rule will probably push the NPS to buy more shares of small and midsized companies, which will boost investor confidence, according to Heo Pil-seok, chief executive officer at Midas International Asset Management, which oversees about $6.4 billion.

Bloomberg