Korea’s National Pension Service, which manages the world’s third-largest pension fund, said it planned to increase the fund’s allocation in global equities and reduce the proportion of local stocks in its mid-to-long-term fund investment portfolio.

According to the plan drawn up at the NPS performance assessment committee’s meeting on Monday, the proportion of investment in overseas stocks will increase to 24.5 percent of the total fund by 2021 from the current 20 percent. The proportion of alternative investment is expected to rise to 14 percent by 2021 from 11.5 percent this year, according to the plan.

However, the fund’s investment in local equities will be reduced to 17.5 percent by 2021 from the current 20 percent, according to the investment plan for the period of 2017-2021.

The plan still needs the final approval of the health minister-led fund management committee, which is scheduled to meet on May 16.

If approved, it will be the first time the pension fund’s allocation in local stocks has fallen below 20 percent, since the NPS adopted the mid-to-long term investment planning system in 2006.

The NPS also plans to reduce the proportion of local bonds to 40 percent by 2021 from the current 51.4 percent.

Rearrangement of the fund’s investment portfolio seems to reflect the low growth trend in Korea, said Oh Hyun-seok, an analyst at Samsung Securities.

“The NPS is going in the right direction because Korea’s growth is slowing and conglomerates’ performances are not as good as in the past,” Oh said.

“Their plan to reduce investment in local equities is not good news for KOSPI but the imminent impact will be limited because the NPS’ selling will not be done in a short amount of time,” he said.

Currently, the NPS manages a total of 512.3 trillion won ($436.4 billion) fund, which is projected to peak at 2,561 trillion won in 2043, according to government estimate.

In 2015, the pension fund’s average return stood at 4.6 percent.

Since new chief investment officer Kang Myoun-wook took the helm in February this year, the NPS has been accelerating its move to seek higher profits.

Such a move includes making its first investment in hedge funds-of-funds this year, following up the NPS’ plan last year to allocate up to 1 trillion won in hedge funds-of-funds for better profits.

The NPS is soon to get a shortlist of candidate firms to manage hedge funds from global consulting company Mercer, and single out the final candidate in late June, local news reports said.

By Kim Yoon-mi (yoonmi@heraldcorp.com)