A poor report card

The National Pension Service (NPS) has done its worst managing the world’s third-largest public pension fund, which ensures financial security for older Koreans. It recorded a negative return rate of 0.92 percent on the funds it managed last year — the poorest result since it was established in 1988. The last time it logged a negative return was in 2008 when it recorded minus 0.18 percent due to the Wall Street-triggered financial meltdown. It lost a total of 5.9 trillion won ($5.3 billion) last year.

The NPS blamed the fall of U.S. stocks — a result of the ongoing trade war between Washington and Beijing — for its poor scorecard. Nevertheless, the state-owned fund claims it fared well when compared with other countries’ public pensions’ performances — for instance, the Japanese Government Pension Investment Fund recorded minus 7.7 percent and the California Public Employees’ Retirement System saw minus 3.5 percent.

Yet the NPS’ claims are only half correct. Those two funds invest more in stocks than in safe securities, such as bonds, with equities taking up 48 percent for both. The NPS invests more money in bonds (52.9 percent) than stocks (35 percent). Its investment portfolio is structured to reap less when stocks do well and lose less when it is the opposite.

The NPS’ negative performance despite its bigger share in safe assets raises questions about the fund’s asset management capabilities, even after taking into account the global market’s weaker conditions last year. The fund had actually been running without the chief investment officer and top investment strategists for a lengthy period. The Canada Pension Plan Investment Board, which also has a 32 percent investment ratio in stocks, reaped a whopping 8.4 percent return on its investment.

The NPS must re-examine its investment strategy. It must draw up a better plan than blaming market conditions for a bad performance.

JoongAng Ilbo, March 4, Page 30