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Social security fund pursues value-oriented investment

By Ding Qi (chinadaily.com.cn)
Updated: 2008-07-22 14:32

The nation’s 500-billion-yuan pension fund will stick to a long-term, value-oriented investment strategy and stabilize its stock-asset proportion despite recent fluctuations of the capital market, said Dai Xianglong, chairman of the National Council for Social Security Fund, in an interview with the People’s Daily.  

The remark may help to solidify investors’ confidence in the weak stock market, which has lost nearly half of its total value since the beginning of this year. 

During eight years of operation, the nation’s social security fund has formed its own investment strategy and style: long-term, value-oriented and responsible investment, Dai said.  

“The social security fund doesn’t have the so-called ‘insider information’,” he said. “Instead, all its investment decisions are based on analysis of the financial market.” 

The fund’s investment should not only focus on retaining and increasing the fund's value, but also maintaining the stability of the financial market and improving the economic development, he added. 

At the end of last year, total assets of the national social security fund topped 500 billion yuan ($73.31 billion). Its average investment returns in the last five years were 10.7 percent. 

The fund benefited from the domestic stock boom last year with investment gains increasing almost six fold year-on-year to 112.9 billion yuan in 2007, as returns from its stock holdings more than tripled.  

However, as the benchmark Shanghai Composite Index fell from above 6,000 points and declined by nearly 50 percent this year, analysts believe the pension fund, which holds a large portfolio of blue-chip stocks, also suffered some losses. 

“Although stocks held by the social security fund declined far less than the index so far this year, the shrinkage of the fund’s stock assets still surpassed its realised gains in the first half of this year,” Dai said. 

However, a long term view is needed in assessing the performance of the fund’s investment, Dai noted. In the face of the volatile stock market, the fund will pursue its investment strategy and make no major changes in its asset allocations. Moreover, while maintaining the proportion of the stock investment, the fund will increase investment on fixed-income products as well as private equity funds in order to ward off market fluctuations, Dai added. 

Last month, the pension fund received approval to invest no more than 20 percent of its total assets into industrial and commercial enterprises and 10 percent in private equity funds.