Will the National Pension Service Increase Its Domestic Stock Investment Ratio? Discussion on Maintaining Target Ratio Rules

[Asia Economy Reporter Park So-yeon] The National Pension Service's highest decision-making body, the Fund Management Committee (Fund Committee), began discussions on the 26th regarding changes to the domestic stock target ratio maintenance rule (rebalancing).

Depending on the outcome of the discussions, there may be an effect of reducing the volume of domestic stocks that the National Pension Service automatically sells according to market conditions.

Kwon Deok-cheol, Minister of Health and Welfare (Chairman of the Fund Committee), said in his opening remarks at the 3rd Fund Committee meeting of 2021 held at the Westin Chosun Hotel in Jung-gu, Seoul, in the afternoon, "In the Fund Committee meetings in January and February, there was a request to discuss the rebalancing system related to the domestic stock assets of the National Pension Fund," adding, "Today, I will report on the National Pension Fund Management target ratio maintenance rule."

Regarding the fund management environment, Minister Kwon mentioned, "Concerns about inflation and rising market interest rates are mixed, and volatility is appearing in the financial markets," and added, "In fund management as well, close monitoring of recent economic changes is necessary."

The Fund Committee will discuss a plan to partially adjust the allowable deviation range related to the domestic stock holding target on this day.

This year, the National Pension Service's domestic stock holding target ratio is 16.8%. This means that 16.8% of the total assets are to be held in domestic stocks, and the allowable deviation range from the target is ±5 percentage points.

Deviation from the range is possible through Strategic Asset Allocation (SAA) and Tactical Asset Allocation (TAA).

SAA allows deviation from the target ratio due to price fluctuations in the asset market, while TAA allows fund managers to strategically deviate from the range to generate additional returns. Currently, the allowable range for SAA is ±2 percentage points, and for TAA it is ±3 percentage points.

As of the end of last year, the National Pension Service's domestic stock ratio was 21.2%, and by the end of this year, this ratio must be adjusted within the '16.8%±5%' limit.

It is very unusual for the National Pension Service to discuss changes to the target ratio rebalancing at this time.

There is criticism that the National Pension Service is trying to revise its asset management plan as individual investors, such as "Donghak Ants," strongly oppose the net selling of domestic stocks by pension funds including the National Pension Service.

This content was produced with the assistance of AI translation services.