Korea National Pension to Put $8.9 Billion in Stocks

By Kyung Bok Cho

July 29 (Bloomberg) -- South Korea's National Pension Service, the country's biggest investor, will put as much as 9 trillion won ($8.9 billion) in the nation's stocks in the second half of this year, the fund's president said.

National Pension will invest between 4 trillion won and 9 trillion won into the country's $867.7 billion of equities ``depending on market conditions,'' President Park Hae Choon told reporters in Seoul today. This year is also ``a window of opportunity to boost overseas assets'' after prices fell due to concerns over U.S. subprime-related losses, he said.

The pension fund seeks to raise its returns on investments by 2 percentage points by late 2009 or early 2010, from an average of 6.1 percent in the three years until 2007, Park said. It will increase holdings of domestic and overseas stocks to about 40 percent of total assets by the end of 2012, while cutting the weighting of bonds to 50 percent.

``Our returns are much poorer than the major pension funds in other countries,'' Park said. ``The difference stems from asset allocation. We will actively increase our higher-risk assets such as stocks and alternative investments.''

The California Public Employees' Retirement System, the biggest U.S. public pension fund, posted a three-year average return of 12.3 percent, according to materials provided today to reporters. Calpers had more than 60 percent of assets in global equities as of the end of April, according to its Web site.

Still, bonds helped the Korean fund post a positive return for the first half of 2008 despite a 10.7 percent loss from equities, said Ohn Kisun, acting chief investment officer. Bonds accounted for 78.9 percent of the fund's 230 trillion won in assets as of the end of June.

`Right Time' to Invest

The fund may buy stakes in global financial firms, possibly by teaming up with Asian sovereign wealth funds, Park said, declining to give more details. National Pension is also considering investing in overseas power-plant construction, resource-development projects and grains, Park said.

``The financial crisis that started with the U.S. subprime problems will persist through the end of this year,'' Park said. ``This year is going to be the right time for the fund to invest overseas. After that, the window might close.''

The pension fund said in March it will invest $300 million in U.S. and European financial firms by participating in a fund led by TPG Inc., a U.S.-based private equity firm.

So-called alternative investments, including possible purchases of shares in state-owned South Korean banks such as Woori Finance Holdings Co. or Korea Development Bank, are projected to account for 10 percent of the fund's assets by the end of 2012, from 2.5 percent in 2007, Park said.

South Korea plans to sell part of its stake in Woori this year, while Korea Development Bank's initial public offering is planned for 2009.

To contact the reporter for this story: Kyung Bok Cho in Seoul at kcho7@bloomberg.net