Minister Kwon Deok-cheol: "By the End of March, National Pension Service Exceeds Upper Limit of Domestic Stock Allowance"

[Asia Economy Reporter So-yeon Park] Kwon Deok-cheol, Minister of Health and Welfare, said on the 9th, "At the end of March, the strategic asset allocation (SAA) proportion of domestic stocks in the National Pension Fund exceeded the upper limit of the allowable range," adding, "It is a situation that requires a response to a market that has been continuously exceeding the allowable range for four consecutive months."

Minister Kwon made these remarks at the 2nd National Pension Fund Management Committee held at the Plaza Hotel in Jung-gu, Seoul, in the afternoon, stating, "Since January, rebalancing has been necessary every month, and in the January and February fund committee meetings, some members raised the need to adjust the allowable range of the target proportion."

He said, "There was a discussion on this matter at the Fund Management Committee on March 26," and added, "Despite in-depth discussions among the members, the discussion was not concluded, so it was decided to reconsider."

On this day, the Fund Committee will discuss again the plan to adjust the allowable range of the strategic asset allocation (SAA) applied to domestic stock assets held by the National Pension Fund, following the discussion on the 26th of last month.

The National Pension Fund's target holding ratio for domestic stocks this year is 16.8%. The allowable deviation from this figure is ±5 percentage points (strategic asset allocation ±2 percentage points, tactical asset allocation (TAA) ±3 percentage points). The Fund Committee is considering raising the allowable range for strategic asset allocation to ±3 percentage points or ±3.5 percentage points.

Since the total allowable range is to be maintained at ±5 percentage points, the tactical asset allocation range would automatically be reduced to ±2 percentage points or ±1.5 percentage points.

Strategic asset allocation allows for deviations from the target ratio due to price fluctuations in the asset market, while tactical asset allocation enables fund managers to strategically deviate from the range to generate additional returns.

However, since the year-end target proportion remains '16.8% ±5%', this does not mean that the National Pension Fund's investment in domestic stocks will expand. Instead, it may reduce the amount of stocks that need to be sold immediately to achieve the strategic asset allocation target.

The Fund Committee began discussing raising the upper limit of the strategic asset allocation after the National Pension Fund's domestic stock sales, which have continued since the end of last year, sparked backlash from individual investors such as the "Donghak Ants."

In the market, there are concerns that such rule changes could undermine the independence and autonomy of the National Pension Fund's management, which serves as a safety net for the public's retirement.

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