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GEPS allows greater flexibility of risk management The move is in line with its long-term goal of doubling down on risker assets

Translated by Ryu Ho-joung 공개 2020-06-02 08:00:09

이 기사는 2020년 06월 02일 08:00 더벨 유료페이지에 표출된 기사입니다.

South Korea’s Government Employees Pension Service (GEPS) has altered its approach to risk management to become more flexible with its holdings in risky and overseas assets.

GEPS has recently made changes in its risk management policy, sources said on May 29. The revised article specifies guidelines for actions to address risk-taking exceeding the risk tolerance limit set for each asset class in advance.

Before the revision, when such an event occurs, the cause of the occurrence should have been reported to head of fund management immediately to take mitigating actions such as reducing the share of risky assets and restricting new investments. But after the revision, head of fund management can decide on how to respond to each case considering the identified cause of the occurrence.

The move by GEPS is seen to respond more flexibly to heightened volatility in the global financial markets in the aftermath of Covid-19 and to continue its push for riskier assets in the long run.

Korean institutional investors are putting more money in overseas stocks and alternative assets in search of higher returns in the mid-to-long term. GEPS is no exception. Its alternative assets reached 1.65 trillion won ($1.34 billion) at the end of 2019, representing nearly 20 percent of total assets. That compares with around 15 percent during three years from 2015 to 2017. GEPS’ investment in overseas stocks also accounted for more than 11 percent of total assets in 2019, up from 7 percent in 2015.

GEPS seemingly has concerned that too much restriction on risk-taking could hamper its efforts to have greater exposure to such asset classes or result in missed opportunities to invest in undervalued assets amid the market disruption caused by Covid-19.

The revision also allowed a more flexible approach to risk-taking exceeding the risk tolerance limit for more than 10 working days. Previously in such cases, actions to reduce investment risks should have been taken immediately. But the revised guidelines allowed delays in such actions or adjustment to the risk tolerance limit for individual asset classes within the limit for total assets.

(Reporting by Hee-yeon Han)
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