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SEOUL, March 20 (Reuters) - The world’s fifth-biggest pension fund, South Korea’s National Pension Service (NPS), may treble its investments in foreign stocks to nearly $21 billion this year, including buying more chunks of Wall Street banks.
Earlier this month, the NPS said it would invest $300 million in U.S. private equity fund TPG’s [TPG.UL] $7 billion fund-raising, joining sovereign wealth funds buying into the U.S. subprime mortgage-hit investment banking sector.
Sovereign wealth fund Korea Investment Corp said in January it was buying $2 billion worth of preferred shares in Merrill Lynch MER.N.
Kim Ho-shik, president of NPS, whose assets look set to double to 415 trillion won ($411 billion) by 2012, said the fund was “carefully considering” adding to its holdings in the U.S. investment banking sector.
“We have a lot of interest in M&As,” he told a news briefing, “The financial sector is very promising in the long run.”
NPS aims to increase investments in corporate M&A and diversify into overseas assets, prompted by an ageing South Korean population that could face a pension shortfall in coming decades.
Kim said stocks currently represent 13.55 percent of the fund’s investment portfolio, a figure the NPS aimed to increase to 17 percent, or potentially 22 percent, by the year-end.
The NPS currently holds around 7 trillion won in foreign shares.
Kim was cautious on the ongoing U.S. credit crisis, saying “problems” in global stock markets could continue for a considerable time.
Sovereign wealth funds from Asia and the Middle East have recently spent billions of dollars propping up big Wall Street and European banks hit by the global credit crunch.
But these funds steered clear of this week’s deal to rescue Bear Stearns BSC.N, the fifth-largest U.S. investment bank, which JPMorgan Chase & Co. (JPM.N) agreed to buy for just $2 a share. Since building up stakes in big Western banks, the funds have seen banks’ share prices drop sharply.
Kim also said the fund would consider investing in state-run Korea Development Bank (KDB) and Woori Finance Holdings 053000.KS once the government issues specific sales plans.
One option, according to local media reports, is for the government to combine KDB, Woori Finance and Industrial Bank of Korea (IBK) (024110.KS), which is owned by the Finance Ministry, into a holding company, creating a financial services firm with $555 billion in assets.
Woori Finance, which runs South Korea’s third-largest bank, is 73 percent-owned by the government. ($1=1009.1 Won) (Reporting by Lee Eun-yul, writing by Marie-France Han, Editing by Ian Geoghegan)