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Pension service opens portfolio for the first time

Published: 01 Oct. 2013, 20:58

While there has been much curiosity about how Korea’s National Pension Service manages its more than 400 trillion won ($372.4 billion) in funds, the world’s fourth-largest pension and funds corporation unveiled details of its investment breakdown yesterday on its Web site for the first time.

Data released by the NPS shows that its investments include 72 trillion won in domestic stocks and 31 trillion won in foreign shares.

Of all the overseas stocks the NPS has in its investment portfolio, its Apple holding has the largest value. According to data, the NPS owns 0.1 percent of Apple shares worth 372 billion won. The list includes shares of prominent multinational companies like Pfizer, Google, Oracle, Nestle, Roche, Exxon Mobil and Cisco. The NPS owns more than 200 billion won of stock in each company.

Data also showed the largest portion of overseas stocks owned by the NPS is related to the financial sector (19 percent) followed by information technology (15 percent), consumer goods (12 percent) and industrial goods (11 percent).

On the other hand, data showed the NPS has minor ownership of stocks in the telecommunications and utility sectors, where returns tend to fluctuate alongside economic statistics.

By country, the NPS owned overseas stocks of companies listed mostly in the United States (43.6 percent) and little of companies based in China (3.7 percent). Of the 18.3 trillion in treasuries and corporate bonds it owns, the largest share is in American bonds (41 percent) followed by U.K. bonds (10 percent).

As for the regional breakdown of alternative investments made by the NPS, the ratio was highest for investments in Europe (32 percent) and then the United States (28 percent). Alternative investments include real estate and resources. The ratio of investment in alternative assets in the European region was high for the NPS because it purchased large-scale properties when real estate prices fell immediately after the global financial crisis.

The NPS has real estate ownership shares in Europe, including the main HSBC building and Gatwick Airport in London, and the Sony Center in Berlin.

Overall data showed that the NPS is most heavily invested in domestic bonds, which account for 60.2 percent of total investments. The NPS plans to reduce the share of its domestic bond investment to 54.2 percent next year.

Meanwhile, its dominance in the domestic stock market has become more significant.

According to the NPS, it owns more than 5 percent of each of the 218 listed companies and more than 10 percent in 20 companies, including Poongsan, LG International Corporation, Fila Korea, Aekyung Petrochemical, Hansol CSN and LS Group.

By value, the top 10 stock investments the NPS has made in Korea are in blue chips. The NPS has 7.2 percent of Samsung Electronics, its largest single investment.

Meanwhile, the funds managed by the NPS are expected to increase more than fivefold by 2044 to reach up to 2,465 trillion won. Next year, the NPS plans to increase its share of investment in domestic stocks from the current 18.7 percent to 20 percent.

“We expect the NPS to invest 1 trillion won every month on domestic stocks until end of 2017,” said Kang Bang-chun, head of AssetPlus Investment Management. “When the Kospi falls below the 1,800 mark, then the NPS invests capital into the local stock market, which gives support.”

There are concerns, however, over the growing influence the NPS has through its stock ownership in areas such as voting rights.

During the election campaign last year President Park Geun-hye pledged to improve the country’s corporate governance by strengthening the voting rights and control of public pension and funds services like the NPS.

“There’s concern [over the pledge] because it could leave room for the government to interfere in corporate management,” said Lee Byung-ki, senior researcher at the Korea Economic Research Institute.

BY YOON CHANG-HEE [[email protected]]