With the record-breaking KOSPI bull run continuing from the second half of last year into early this year, the National Pension Service also posted record results on the back of it.
On the 27th, according to the fund management headquarters of the National Pension Service (NPS), last year the National Pension Service recorded a rate of return of 18.82%. In particular, the domestic stocks institutional sector posted a remarkable return of 82.44%, driving overall performance. It overwhelmed overseas stocks (19.74%), which had long been the cash cow for returns.
The fund management headquarters analyzed that domestic stocks surged explosively as the strength of technology stocks centered on artificial intelligence (AI) and semiconductors coincided with expectations for the capital market value-up policy. In fact, the valuation of domestic stocks held by the National Pension Service stood at 369 trillion won as of the 26th, a 52% jump in just over two months from 243 trillion won at the end of last year.
The key drivers were Samsung Electronics and SK hynix. The value of Samsung Electronics equity held by the National Pension Service jumped from 55 trillion won at the end of last year to 100 trillion won as of the 26th, nearly doubling. SK hynix also saw its valuation soar vertically from 35 trillion won to 59 trillion won. The two stocks alone generated about 159 trillion won in valuation gains.
However, as the "KOSPI bull run" continues, an emergency is expected for future adjustments to the domestic stock allocation. Due to the sharp rise in stock prices, the domestic stock weight had already risen to 18.1% as of the end of last year. Some analysis says additional buying capacity could be limited under asset allocation principles.
Last month, the National Pension Service fund management committee raised this year's domestic stock target weight from 14.4% to 14.9%. The allowable range by asset remains unchanged, allowing flexible management within a "±5 percentage point" band by adding ±3 percentage points for strategic asset allocation (SAA) and ±2 percentage points for tactical asset allocation (TAA) to the baseline weight. Accordingly, domestic stocks can be held up to a maximum of 19.9% (14.9% + 5 percentage points).
The temporary deferral of "rebalancing" is expected to provide breathing room. Rebalancing is adjusting so that the weight of an asset class stays within the allowed range when it deviates from the target. Until now, when the range was breached, assets were automatically bought or sold. Earlier, as it raised the domestic stock target weight, the fund committee also decided to temporarily defer rebalancing.
On this, experts say measures such as the rebalancing deferral will be positive for the domestic stock market. Hwang Yong-sik, a professor of business administration at Sejong University, said, "If the government asks for a higher domestic share in the fund portfolio, the key is how much the National Pension Service will accept it." He added, "Given the current situation, where the fund has showcased skill with record returns, there seems to be ample justification to accept the government's request to vitalize the market."
However, there was also advice that the National Pension Service's stock management strategy should be left to the professional competence of pension fund managers.
Park Chang-gyun, a senior research fellow at the Korea Capital Market Institute, said, "This rebalancing deferral is a temporary measure," adding, "A 0.5% stock target weight translates to 5 trillion won, and how to manage such a scale should be left to the National Pension Service's expertise."
Commissioner Park said, "The National Pension Service invests by assessing the country's fundamentals and the value of corporations, and it should be managed professionally in line with this environment," adding, "Currently, insurance premium income exceeds pension payouts, so the fund is accumulating, but in a few years it could reverse. At such a stage, investment strategy should prioritize liquidity over the rate of return."