As the National Pension Service raised its target ratio for domestic stock holdings, it decided to gradually reduce the share of investments in domestic bonds. The investment strategy of the National Pension Service's fund management committee is seen as tilting more toward profitability than stability.
The share of National Pension Service investments in domestic bonds has steadily decreased. For this reason, experts said the committee's latest decision is unlikely to have a large impact on the domestic bond market. However, with bond yields surging recently, the news that the "big player," the National Pension Service, will also reduce its investment share is heightening tension in the bond market.
Looking at the adjustment plan for the 2026 target ratios by asset and the medium-term asset allocation plan for 2027–2031 approved on the 28th by the National Pension Service fund management committee, targets for other asset classes were adjusted downward by as much as the target for domestic stocks rose.
In particular, the target share for domestic bonds is expected to shrink both this year and next year. This year's target share for domestic bonds was adjusted to 23.1%, down 1.8 percentage points (p) from the previous 24.9%. The 2027 target share was also adjusted down 1.3%p to 21.8%.
Reflecting the surge in the domestic stock market, the committee raised this year's target share for domestic stocks to 20.8% from the previous 14.9%. In the 2027 target by asset class, domestic stocks were also set at 20.8%. As the share of domestic stock investments increased, the share of bond investments decreased. The industry assesses that the National Pension Service's fund management strategy is shifting from "stability" to a focus on "profitability."
Experts predicted that even if the National Pension Service reduces its target share for domestic bonds, it will not immediately have a major impact on bond-market supply and demand.
An official at a financial investment firm said, "The National Pension Service's demand for domestic bonds had been steadily declining," and added, "Because the bond market had already entered a weak phase due to concerns about inflation, expectations of a base rate hike, and a weaker won, it does not seem likely to have a big impact on supply and demand right away."
As of the end of February this year, the National Pension Fund portfolio shows domestic bonds at 18.5% (297.7 trillion won). The National Pension Service's share of investments in domestic bonds continued to decline from 34.9% in 2022 to 31.5% in 2023, 28.4% in 2024, and 20.9% in 2025.
However, the bond market is on edge over news that the "big player," the National Pension Service, may further reduce its investment share. With government bond yields already rising on concerns about inflation and monetary tightening, investor sentiment could weaken further.
There could also be growing concerns about the stability of fund management over the medium to long term. Nam Jae-woo, head of division at the Korea Capital Market Institute, said of the National Pension Service's decision, "It can be understood as a measure to minimize shocks to the stock market while sacrificing the fund's stability."
In a report published last year, the Korea Capital Market Institute added, "Expanding risk assets can increase the fund's operating returns over the long term, but it can also increase the volatility of the fund's size and the volatility of the investment share of specific asset classes."
There is also a possibility that a gap in supply and demand from the National Pension Service could lead to higher issuance expenses over the medium to long term. Nam said, "In the government bond market, the National Pension Service is a major player on the supply-and-demand side," adding, "If the National Pension Service's investment share declines over the medium to long term, authorities could face higher issuance expenses."