NPS Fund Committee to Discuss 10% FX Hedging for Overseas Investments on the 15th

Jeong Eun-kyung, Minister of Health and Welfare, is attending and speaking at the National Pension Fund Management Committee held at the Government Complex Seoul Annex in Jongno-gu, Seoul on the 24th. 2025.11.24 Photo by Cho Yongjun

The National Pension Service will make a final decision next week on expanding the foreign exchange hedging ratio for its overseas investment assets to a maximum of 10%.

According to government ministries on December 12, the National Pension Service has notified its committee members that it will hold a Fund Management Committee meeting at the Government Sejong Complex on December 15 in the afternoon. The meeting will be chaired by the Minister of Health and Welfare and attended by vice ministers from the Ministry of Economy and Finance, Ministry of Agriculture, Food and Rural Affairs, Ministry of Trade, Industry and Energy, and Ministry of Employment and Labor, as well as 19 private sector committee members.

This will be the final meeting of the year, and the agenda includes changes to the fund management plan, such as 'extending the adjustment period for the strategic foreign exchange hedging ratio and extending the foreign exchange swap agreement with the Bank of Korea.' Any amendment to the fund management guidelines requires a resolution by the Fund Management Committee, which is the highest decision-making body of the National Pension Service. An official from the committee stated, "Since 2022, the extension of the strategic foreign exchange hedging ratio to 10% has been renewed annually, and this year, another extension will be discussed."

In 2022, in response to a request from the Ministry of Economy and Finance and others, the National Pension Service established guidelines to raise the strategic foreign exchange hedging ratio to up to 10% (with a maximum of 15% including tactical hedging). However, there has never been an officially confirmed instance of the policy being implemented since its introduction. Market participants estimate that the National Pension Service may have activated strategic hedging once in April, when the won-dollar exchange rate surpassed 1,480 won.

Accordingly, the National Pension Service reportedly convened the Investment Policy Expert Committee on December 10 to discuss the possibility that the hedging activation formula (criteria) might have been exposed to the market and to consider ways to redesign it. A government official pointed out, "If the hedging activation level is exposed to the market, its effect on exchange rate stabilization could be weakened," and added, "Through the committee's resolution, the compensation system related to the foreign exchange hedging strategy could be revised to increase strategic ambiguity."

First Vice Minister of Economy and Finance Lee Hyungil is expected to attend the meeting and request an increase in the proportion of domestic stock investments. The current proportion of domestic stock investments by the National Pension Service is 14.9%. To stabilize the foreign exchange market, the government is also reviewing the possibility of the National Pension Service issuing foreign currency-denominated bonds. A Ministry of Health and Welfare official stated, "We are reviewing the requirements for issuing foreign currency bonds and conducting related research projects."