"National Pension Service’s Expansion of Korean Stocks Is Natural... Voting Rights to Be Strengthened"

Sungjoo Kim's New Year's Press Conference
Portfolio Flexibility to Enhance Returns
Currency Hedge Proportions Kept Private... "Strategic Ambiguity"
Signals More Active Exercise of Voting Rights... "Our Duty as Investors"

Sungjoo Kim, Chairman of the National Pension Service, held a New Year's press conference near Seoul Station on the 29th to explain the operational direction for this year.

Sungjoo Kim, Chairman of the National Pension Service, emphasized that increasing the proportion of domestic stocks in the fund's portfolio is a natural step to enhance returns. He also stated that the fund's approach to foreign exchange is not aimed at boosting the domestic stock market or stabilizing the exchange rate, but rather at fulfilling its primary mission of securing retirement income for the public, by maintaining 'strategic ambiguity.' In addition, he suggested that the exercise of voting rights would become more proactive.

On January 29, Kim held a New Year's press conference near Seoul Station and explained this direction. He said, "For the past ten years, overseas stock returns have overwhelmingly outperformed domestic stocks, but starting last year, domestic stock returns have become higher. Since we are now hitting the limit, there is a question of whether selling is beneficial or detrimental to returns. For this reason, the Fund Management Committee has granted more autonomy to flexibly adjust the portfolio."

He also refuted the criticism that expanding the proportion of domestic stocks is intended to prop up the domestic stock market. Kim stressed, "Our top priority is generating stable and sustainable returns, and all decisions are made accordingly. I have never instructed the management team otherwise, and at least during my tenure, I will maintain complete independence from political and economic powers."

He refrained from commenting on specific returns. However, he expressed confidence that the National Pension Service's returns would be outstanding even among the world's largest pension funds. Kim explained, "Because the National Pension Service has a larger proportion of investments in the Korean stock market compared to other pension funds, our returns have been very strong."

Strategic Currency Hedging Kept Private... Signals More Active Exercise of Voting Rights

Kim stated that the fund has decided to keep its strategic currency hedging confidential. The more the fund's currency strategy is exposed to the market, the more challenging it becomes, so he intends to maintain strategic ambiguity. Currency hedging is a technique that locks in gains or losses from exchange rate fluctuations in advance, thereby reducing the volatility caused by sharp currency movements. Kim said, "When the won-dollar exchange rate rises, the cost of investing overseas in US dollars increases, and all of this is paid for with the precious insurance premiums contributed by the public. The exchange rate is therefore very important to the National Pension Service, and we develop and implement our own strategies independently, not at the request of the Bank of Korea or the government."

He also emphasized plans to strengthen the 'Stewardship Code,' which encourages institutional investors to actively voice their opinions. Kim said, "Until now, responsible investment by the National Pension Service has been rather formal considering the fund's significant role and scale, ESG principles have been somewhat superficial, and the application of the Stewardship Code has been very conservative. Since the National Pension Service can only generate returns if the countries and companies it invests in grow, it is only natural to intervene if losses arise from risks at specific companies."

In this context, he cited Korean Air as an example from the past. Kim said, "When the 'nut rage incident' caused the stock price to fall, Korean Air did not respond whether we sent a private letter or a public letter. However, when we finally announced our intention to exercise our voting rights, the stock price of Hanjin KAL soared. This was not pension socialism, but a legitimate exercise of voting rights to which the market responded."

He also announced plans to increase the number of fund management personnel and to open a fifth overseas office, this time in an emerging market rather than a developed country. In addition to recruiting experienced fund managers, there will also be a program to train recent university graduates as junior fund managers.

Kim pledged, "We must lead pension reform to create a sustainable pension system, and move toward structural reform by incorporating retirement pensions into the public pension system. We will also reduce blind spots in the pension system and achieve a 'pension for all' through institutional improvements and administrative innovation that the public can truly feel."

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