Purchases of overseas stocks by South Koreans are soaring as ultra-low interest rates push up the price of bonds and sluggish economic growth depresses domestic stocks, with retail and institutional investors both getting heavily involved.
Large pension funds, led by the National Pension Service (NPS), are allocating more funds to offshore assets and especially stocks, Yonhap Infomax reported on Friday (August 14). The world’s third-largest pension fund, the NPS said in its mid-term asset allocation plan last year that overseas investment will comprise over 50% of total assets by 2024. A recent annual report said the offshore ratio would reach 22.3% by the end of this year and 30% by 2024.
As the NPS is expected to expand its funding base to 1,000 trillion won ($844 billion) by about 2024, approximately 300 trillion won will be invested in overseas stocks. The 30% target for foreign stocks is similar to the 2024 allocation for domestic bonds, which so far have taken most investment. Their share is targeted at 41.9% by the end of this year.
Other South Korean pension funds are matching the offshore investment strategy by NPS.
The proportion of overseas stocks held in the investment portfolio of the Korea Teachers’ Pension Fund is expected to rise to 26.3% by 2024, up from 16.5% at the end of last year and 8.3% in 2015. The retirement fund for private school teachers and employees was managing 21.4 trillion won ($17.3 billion) of assets at the end of 2019.
The Government Employees Pension Service has similar investment plans. According to the mid-term and long-term asset allocation plan unveiled in late April, the portion of overseas stocks will be increased to 16% by 2025, from a forecast 12.9% at the end of next year. The fund was managing 8.2 trillion won ($6.7 billion) of assets at the end of last year. (Reporting by Kyoungho Lee)