5-Year Target Return Rate 5.2% per Year... National Pension Service "Reducing Domestic, Increasing Overseas Investments"

[Asia Economy Reporter Ji-hwan Park] Park Neung-hoo, Minister of Health and Welfare, stated on the 20th that the National Pension Fund will choose "the most aggressive approach to pursue returns" regarding how to allocate the fund over the next five years by category.

After the 5th meeting of the National Pension Fund Management Committee held at the Plaza Hotel in Jung-gu, Seoul, Minister Park told reporters, "We discussed three proposals today, and the majority of the committee members expressed opinions in favor of the most aggressive approach to pursue returns."

Minister Park said, "The IMF expects that the global economy will mostly experience negative growth rates or growth close to 0% this year," adding, "Next year, due to the base effect, rapid growth is expected. When looking at the next five years, there is likely to be no significant difference compared to last year or the year before."

He added, "Nevertheless, if unexpected economic changes occur after the second half of this year or next year, we may flexibly respond and revise the asset allocation plan."

Minister Park emphasized, "It is a definite direction to reduce the proportion of domestic stocks in the mid to long term, but in the short term, stabilizing the capital market, including the domestic stock market, is also an important goal of fund management."

He further stated, "While the long-term direction remains unchanged, within the scope of discretionary authority, if the stock market overheats, we will reduce the proportion to cool it down, and if the stock market declines, we will increase stock investments to stabilize the market through a flexible approach."

On this day, the Fund Committee approved a target return of 5.2% for the National Pension Fund's medium-term asset allocation plan for 2021?2025. The medium-term asset allocation plan is a five-year fund management strategy established annually to improve the fund's profitability and stability. It determines the fund's target return and target proportions by asset class based on analyses of domestic and international economic outlooks, expected returns, and risks by asset class over the next five years.

The target proportions by asset class as of the end of 2025 to achieve this are set at approximately 50% stocks, 35% bonds, and 15% alternative investments, with gradual adjustments planned considering market impact and feasibility.

According to the approved medium-term asset allocation plan, the proportion of risk assets (stocks and alternatives) in the National Pension Fund is expected to expand to around 65% by 2025. Overseas investments will also increase to about 55% by 2025 (35% stocks, 10% bonds, 10% alternatives), maintaining the policy of diversifying investments (expanding risk assets and overseas investments) to enhance stability and profitability.

The target proportions by asset class for the National Pension Fund at the end of 2021 were set as follows: domestic stocks 16.8%, overseas stocks 25.1%, domestic bonds 37.9%, overseas bonds 7.0%, and alternative investments 13.2%.

This content was produced with the assistance of AI translation services.