The National Pension Service has decided to increase its target allocation for domestic stocks from 14.9% to 20.8% this year. This adjustment reflects the significant rise in the KOSPI index, which has pushed the actual share of domestic stocks held well above the initial target.
According to Yonhap News Agency, the National Pension Fund Management Committee held its fifth meeting on May 28, where it reviewed and approved a proposal to adjust the target allocations for various asset classes and the medium-term asset allocation plan for 2027 to 2031.
The medium-term asset allocation plan outlines the target allocations and management directions for stocks, bonds, and alternative investments over the next five years. It serves as a guideline to enhance the fund's profitability and stability.
Initially, the target allocation for domestic stocks was set at 14.4% as per the fund management plan approved in May of last year. However, as the domestic stock market continued to rise, the committee raised the target allocation to 14.9% in January, with an upper limit of 19.9% including allowable ranges.
As the KOSPI continued to surge, the actual allocation of domestic stocks reached 24.5% by the end of February. In light of this, the committee decided to raise the target allocation to 20.8%, considering market conditions, fund profitability and stability, and the impact on financial markets.
The committee explained that this decision was made to enhance long-term profitability and stability while considering the potential structural changes in the domestic stock market and the need to mitigate market shocks from rebalancing.
The adjusted target allocation will take effect at the end of next month, when the current rebalancing suspension ends. Other asset class target allocations will also be adjusted in line with the increased domestic stock allocation.
By the end of this year, the target allocations for various asset classes will be 34.7% for overseas stocks, 23.1% for domestic bonds, 7.4% for overseas bonds, and 14.0% for alternative investments.
To respond to the volatile domestic stock market, the committee has temporarily expanded the allowable range for strategic asset allocation (SAA) for domestic stocks. However, specific allowable ranges will not be disclosed to ensure market stability and fairness in fund management.
Additionally, to minimize market impact, the committee has improved related rules, including reducing the maximum daily rebalancing size. The committee plans to reassess the SAA allowable range by the end of this year.
The committee also confirmed the medium-term asset allocation plan for 2027 to 2031, which maintains the focus on expanding overseas and alternative investments.
By the end of 2031, the target allocations for various asset classes are expected to be approximately 55% for stocks, 30% for bonds, and 15% for alternative investments.
For next year, the target allocation for domestic stocks will remain at 20.8%. The allocations for overseas stocks, domestic bonds, overseas bonds, and alternative investments have been set at 35.6%, 21.8%, 7.4%, and 14.3%, respectively.
Jeong Eun-kyung, Minister of Health and Welfare, stated, "This medium-term asset allocation is a decision made in response to recent market changes, aimed at enhancing the long-term profitability and stability of the fund while also considering its impact on financial markets. We will continue to closely monitor market conditions to ensure that fund management balances principles and flexibility."
* This article has been translated by AI.
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