The National Pension Service adjusted its fund management plan by slightly raising the target ratio for domestic stocks and lowering the ratio for foreign stocks. It also decided to temporarily suspend 'rebalancing' (asset allocation adjustment), which automatically executes transactions when the stock ratio deviates beyond a certain range. This is a measure to avoid mechanical stock sales and reduce market impact as the National Pension Service's domestic stock ratio has been rapidly increasing due to recent domestic stock market appreciation.
The National Pension Fund Operating Committee held a meeting at the Government Seoul Plaza on the 26th and deliberated and passed the 'Improvement Plan for the National Pension Fund Portfolio' with the above content.
First, the target ratio for foreign stocks was lowered by 1.7 percentage points from the existing 38.9% to 37.2%. The Fund Committee explained that it took into account the increased burden of foreign currency procurement needed for overseas investments. The target ratio for domestic stocks was raised by 0.5 percentage points from 14.4% to 14.9% to compensate for the decrease in foreign stock ratio. The committee explained that this decision was made after comprehensively considering the impact on fund returns and the existing fund management direction.
The adjusted domestic stock target ratio (14.9%) has a strategic asset allocation (SAA) of ±3 percentage points and a tactical asset allocation (TAA) of ±2 percentage points applied, allowing the domestic stock ratio in total assets to be up to 19.9%. If this range is exceeded, stock sales will be executed in principle.
As of the end of November last year, the National Pension Service's domestic stock ratio was 17%. As the domestic stock market continued its upward trend afterward, there is also a possibility that it has already exceeded this upper limit at present. This is the background behind the government's decision to temporarily suspend rebalancing, or domestic stock sales.
