The change would apply only to assets managed by domestic firms and would not alter the BOK's overall mix of stocks and bonds in its foreign reserves, the central bank said Wednesday.
The shift comes as U.S. Treasury yields hover near two-decade highs, with the benchmark 10-year yield topping 5 percent this week and reaching about 5.04 percent Tuesday, its highest since 2007.
The BOK said the move is aimed at broadening the investment skills of domestic asset managers rather than responding to short-term moves in Treasury yields.
The change applies only to assets entrusted to Korean firms and will not alter the central bank's overall mix of stocks and bonds in its foreign reserves.
The central bank will reduce passive developed-market stock mandates and expand overseas bond investment, replacing its existing U.S. Aggregate Bond strategy with a Global Aggregate strategy covering about 28 countries and roughly 30,000 securities.
The move marks a shift from helping Korean asset managers build a basic overseas investment business toward training them to make active investment decisions and generate returns above market benchmarks.
As part of the shift, the BOK will reduce mandates for developed-market equity funds, which largely follow benchmark indexes, and expand overseas bond mandates handled by domestic firms.
It will also replace its existing U.S. Aggregate Bond strategy with a Global Aggregate strategy covering bonds across multiple countries and currencies.
The change comes after overseas investing expanded sharply among South Korean individuals and institutions, reducing the need for the BOK to support relatively simple foreign equity investment strategies.
Overseas equity funds held 163 trillion won ($118.9 billion) in net assets as of June, nearly six times the 27.7 trillion won recorded in 2020, according to Korea Financial Investment Association data cited by the BOK.
Overseas equity exchange-traded funds accounted for 126.3 trillion won, surging from just 1.6 trillion won in 2020.
Overseas bond funds remained much smaller at 11.1 trillion won.
The growth has given domestic asset managers a larger independent business base outside the central bank's program, while years of BOK mandates have helped them build overseas investment teams and strengthen research, investment decision-making, risk management and settlement systems.
The BOK began entrusting part of its foreign assets to domestic firms in 2012 with Chinese equities and expanded the program to developed-market stocks in 2019 and U.S. bonds in 2022.
The amount entrusted to domestic managers rose from $100 million in 2012 to $3.21 billion in 2025 and remained at that level as of July this year. Five asset managers currently participate in the program.
The portfolio consists of $1.92 billion in developed-market equities, $700 million in U.S. bonds and $590 million in Chinese stocks.
AJP Takeaways
- The Bank of Korea (BOK) will expand part of its foreign exchange reserve management beyond U.S. bonds by adopting a Global Aggregate strategy covering about 28 countries and roughly 30,000 securities.
- South Korea's central bank said the change will give domestic asset managers more experience in active, return-oriented investing while leaving the BOK's overall stock-and-bond allocation unchanged.
- South Korea's overseas investment market has grown rapidly, with overseas equity funds reaching 163 trillion won ($118.9 billion) in net assets as of June, reducing the need for the BOK to support simpler foreign equity strategies.
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