Deputy Minister Ki Jae: "8 Major Social Insurances, Portfolio Improvement Needed Focusing on 'Bonds'"

8th Social Insurance Asset Management Meeting

Ando-geol, the 2nd Vice Minister of the Ministry of Economy and Finance, is holding a social insurance asset management meeting at the Deposit Insurance Corporation in Jung-gu on the 25th. 2021.5.25
[Photo by Yonhap News]

[Sejong=Asia Economy Reporter Son Seon-hee] Ando-geol, Vice Minister of Strategy and Finance, pointed out on the 25th regarding the asset management of the eight major domestic social insurance funds, "It is necessary to gradually improve the portfolio, which is mainly composed of domestic bonds, through active diversification of investment asset classes."

Vice Minister Ahn held the '8 Major Social Insurance Asset Management Meeting' at the Korea Deposit Insurance Corporation in Jung-gu, Seoul, in the afternoon, stating, "Each social insurance fund should establish and operate a customized investment diversification strategy that reflects the characteristics of the funds they hold and manage, disperses risks through careful review of market conditions and individual asset classes, and enhances returns."

According to the Ministry of Strategy and Finance, the proportion of domestic bonds in the eight major social insurance funds was 46.1% as of last year. This is nearly twice as high compared to the United States (27.9%), Canada (22.8%), and Norway (24.7%).

Furthermore, Vice Minister Ahn urged, "When establishing asset allocation plans, advanced asset management strategies and techniques such as Asset-Liability Management (ALM) should be actively utilized, and the asset management system should be continuously advanced through specialization of asset management personnel and outsourcing of asset management for small funds."

According to the '2021 Fund Management Evaluation Results' reported at the Cabinet meeting that day, the eight major social insurance funds recorded a return of 8.6% last year. Despite the COVID-19 pandemic, returns increased by 0.3 percentage points compared to 2019 due to factors such as the stock market boom.

By institution, the Private School Teachers' Pension Fund (11.5%), Industrial Accident Compensation Insurance (11.2%), and Government Employees Pension Fund (10.5%) recorded double-digit returns. The National Pension Service also achieved a 9.6% return, reaching over 70 trillion won in earnings for two consecutive years. Its global return ranking rose from 6th to 4th place.

Vice Minister Ahn stated, "Improvements have been made such as strengthening the expertise and independence of the asset management committee, introducing stewardship codes to enhance socially responsible investment, and reforming the risk asset management system." He added, "The National Pension Service was positively evaluated for strengthening expertise through the legalization of specialized committees and advancing management strategies by promoting the introduction of a reference portfolio."

However, he cautioned, "We should not be swayed by short-term performance," emphasizing, "For the stable operation of the eight major social insurance funds, multifaceted measures to improve stable returns from a mid- to long-term perspective must be continuously implemented."

The meeting was attended by Vice Minister Ahn, Ministry of Strategy and Finance officials related to finance, heads of asset management departments of the eight major social insurance funds, Senior Research Fellow Lee In-hyung of the Korea Capital Market Institute, Professor Cho Hoon of KAIST, Yang Jae-myung, Head of Investment Pool Business Division at Samsung Asset Management, and Lee Byung-sung, Vice President of Mirae Asset Global Investments, among others.

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