Korea Post, manager of $65 billion in assets, said on Friday that it plans to raise its stock investments to almost a third of its total assets over the next three to five years in pursuit of higher yields.
Currently, the state-run Korea Post has about 3% of its assets in stocks, or 1.9 trillion won ($2.06 billion), through outside fund management firms, said Lee Sang-moo, director of the agency's asset management team.
Most of the stock portfolio is domestic-oriented, and it has allocated an additional 400 billion won for local M&A deals and infrastructure projects.
"Our investments had been basically focused on winning spreads from bond yield curves," Lee said. "But the yield curves have been flattening and pension funds are increasing investment in bonds, so the merit of long-term investment in bonds has been weakening."
It will continue to entrust a big chunk of its equity investment, of which domestic stocks will make up 70%, to outside managers.
The postal services agency is aiming to outperform the KOSPI for domestic stocks and MSCI World Equity Index for global equities.
Korea Post, which has a monopoly on the delivery of letters like Japan Post, has been trying to make up for declining mail income by expanding financial services from savings and insurance products.
It derives half of its revenue from postal services, with 2,800 post offices across the country, and financial service operations such as insurance policy sales and savings products make up 43%.
But competition in the financial sector promises to increase as the free-trade pact with the United States forces South Korea to open its insurance market to more competitors and places tighter rules on insurance sales by post offices.
The National Pension Service said in late June that it will raise stock investments by 65% to 26.05 trillion won in 2008 from this year. The state-run pension agency has more than $200 billion under management.