NPS revises investment guideline to add more small-and mid-cap shares

South Korea’s biggest institutional investor National Pension Service (NPS) has amended its internal investment guideline, a move that is expected to allow the pension fund to add nearly 1,000 more small- and mid-cap stocks for its 50 trillion won ($43.9 billion) worth investment portfolio allocated for direct investment.

According to NPS on Wednesday, its fund management division abolished the internal guideline on fund management that had allowed investment only in the companies with market capitalization of 100 billion won or more, sales of 30 billion won or above, and average daily trading value for six-month-period amounting to 500 million won or more. The amendment was finalized early this month on approval by the chief executive officer of NPS without going through board directors meeting.

The NPS made the latest change in its investment guideline after it has been blamed for a downward spiral in the secondary Korea Securities Dealers Automated Quotation (Kosdaq) bourse mainly consisted of small- and mid-cap stocks.

Upon the change, about 1,000 companies - 300 from main Korea Composite Stock Price Index (Kospi) and 600 from secondary Kosdaq - are expected to be included in the list of NPS direct investment portfolio.

Previously, the pension operator had remained hesitant to buy shares of companies with limited liquidity, citing its large operating asset volume. But after it has been accused for the downward spiral in small- and mid-cap domestic shares, especially in Kosdaq market, the pension operator was forced to change its stance, industry watchers said.

The NPS, the world’s third largest pension fund, manages 541 trillion won as of the end of July and invests 95 trillion won, or 18 percent of the total, in domestic stocks.

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