Larry Summers, professor at Harvard University in Boston, the United States, and a former U.S. Treasury Secretary, urged the state wealth funds including the National Pension Service (NPS) to do their utmost to help end the economic crisis.
At the Global Conference hosted on Sept. 17 by the NPS to commemorate its 25th anniversary at the Hotel Shilla in Seoul, Summers went on to say in his keynote speech that they should expand spending as well as investments to help resolve the crisis, and the public sector including the government and wealth funds should take the lead in tackling the crisis. The theme of the gathering was “Sustainable Growth and the NPS Fund.” Among the participants was Prime Minister Kim Hwang-sik, who gave a congratulatory speech.
Chairman Jun Kwang-woo in his opening speech of the conference said on behalf of the NPS, he was delighted to welcome everyone to the NPS Global Conference. He said, “The NPS was established in 1987 with an eye toward promoting the welfare of the Korean people. Since its inception, the NPS has become the world’s fourth largest public pension fund with assets under management of 380 trillion won.” Despite celebrating its 25th anniversary, he said, the NPS still remains in its initial growth stage and he envisions another enormous leap ahead in the decades to come.
“To commemorate its quarter century of achievement,” Jun said, “the NPS is honored to host this conference. This event will offer thought-provoking perspectives on themes that will shape our future and will also provide a unique opportunity to interact with colleagues from other organizations.
“I would like to thank you again for joining us today and wish for a most fruitful discussion and deep interaction,” the chairman said.
Chairman Mark Mobius of Templeton Asset Management said it is about time that wealth funds should invest in the financial markets in emerging nations whose treasuries are healthier.
Summers served as the treasury secretary in the Clinton government and also as chairman of the Presidential Economic Advisory Council in the Obama administration. He called for the investment of treasury funds to create demand, although excessive expenditures and investment created the crisis. He said investment and expenditures, especially from public funds, should be the means to recover economic growth.
The former U.S. Treasury Secretary continued on to say the low interest rates now prevailing in the financial markets should provide good opportunities for long-term investors such as wealth funds, adding that the interest rates fell as a result of many investors buying national bonds, a safe asset, making stocks and other riskier assets attractive for investments.
In the long run, investments in stocks and real estate would not only help the economic recovery, but at the same time would secure excellent returns on investments.
Summers also urged the NPS to expand its overseas investments to become a major investor in the world, leading the changes in the global financial market, adding that it should allocate half of its investment assets for overseas.
He said many governments are pursuing low-interest policies, which he said were only means to curb inflation. He said the third qualitative easing (QE3) undertaken by the U.S. Federal Reserve would have a questionable impact on the economy, as interest rates are already too low.
On the European debt crisis, the Harvard professor said, “Like Korea and Russia, who resolved their past economic crises, the southern European countries should each try to recover its competitive strength through adjustment of interest rates, but it is impossible as they use the same currency.”
However, he said, the ECB’s positive efforts to support those countries is very encouraging.
Chairman Mobius, in the meantime, spoke via video feed as he could not arrive in time to attend the event in Seoul due to bad weather. He repeatedly stressed that emerging markets should be focused because they have already improved over advanced markets in terms of safety, growth, and other factors.
