Park Neung-hoo "National Pension Overseas Stocks to Expand by 50%... Need for Currency Risk Defense Strategy"

30th 9th National Pension Fund Management Committee

[Asia Economy Reporter Minji Lee] "We will discuss tactical foreign exchange currency composition measures to defend against fluctuations in fund returns caused by exchange rate volatility."

On the 30th, Park Neung-hoo, Minister of Health and Welfare and Chairman of the National Pension Fund Management Committee, made this remark at the 9th meeting of the National Pension Fund Management Committee held at the Millennium Hilton Hotel in Jung-gu, Seoul. In his opening remarks, Minister Park said, "Although the proportion of overseas investments in the National Pension Fund is increasing, the impact of exchange rate fluctuations is gradually growing, requiring continuous monitoring and agile responses."

Minister of Health and Welfare Park Neung-hoo is delivering opening remarks at the National Pension Fund Management Committee held on the 30th at the Millennium Hilton Hotel in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

As the domestic spread of the novel coronavirus disease (COVID-19) has somewhat weakened, the exchange rate has stabilized compared to the early stages of the pandemic. However, in the United States and Europe, COVID-19 resurgence is occurring, maintaining high market uncertainty.

He stated, "Considering the size of the domestic foreign exchange market and the impact of exchange rate policies on the overall portfolio, we have strategically not hedged the Korean won against foreign currency assets since the end of 2018," and added, "According to medium-term asset allocation, the scale of overseas investments is expected to account for more than 50% of the total fund in 2024, and the fund's returns will increasingly be affected by exchange rate fluctuations."

Minister Park also emphasized, "Currently, the National Pension Fund has no means to adjust currency composition by country, making it difficult to respond appropriately when the value of overseas assets declines due to exchange rate fluctuations," and said, "Through today's meeting, we will report on a 'tactical foreign exchange currency composition plan' to defend against fluctuations in fund returns caused by exchange rate volatility."

Additionally, the meeting plans to continue discussions on institutional measures to compensate in cases where loan repayments cannot be made due to the death of lenders related to the 'National Pension Emergency Retirement Fund Loan Project' and on improving investment restriction requirements related to hedge funds.