As the KOSPI soared to 9,000 points, the National Pension Service's equity valuation doubled in half a year. With the end of the asset allocation rebalancing deferral set for next month, the National Pension Service faces a pressing question of how to unwind this massive capital while minimizing market shock.
On the 26th, according to FnGuide, as of the 23rd, the valuation of listed shares in which the National Pension Service holds at least 5% equity was tallied at 495.338 trillion won. That is more than double the 245.1908 trillion won at the end of last year.
The surge came as the KOSPI index jumped 116% this year, lifting the prices of its holdings in tandem. The industry currently estimates the National Pension Service's domestic stock weight is nearing 30%.
The issue is the scheduled end next month of the asset allocation rebalancing deferral. With mechanical selling unavoidable to trim the bloated domestic stock share, the core task is how to defend against market shock. Market experts expect the National Pension Service to pursue a split-selling strategy aligned with market conditions rather than dumping all its holdings at once.
Hong Chun-uk, head of Prism Investment Advisory, said, "Even if the National Pension Service sells domestic stocks, it does so when the market is strong and liquidity is ample," adding, "The first half of this year would have been a good time to sell, but in the current volatile market, I don't think large-scale selling is easy."
Nam Jae-u, senior research fellow at the Korea Capital Market Institute, said, "To lessen the shock to the market, it is important that the National Pension Service's trades are not exposed to the market," adding, "The basic strategy will be to sell in ways that, as much as possible, are not disclosed to the market for both direct management and outsourced management."
Still, the prevailing view is that the ripple effects on the market are unavoidable. If the National Pension Service's large volume hits the market as supply, it could lead not only to a supply-demand imbalance but also to weaker investor sentiment. Nah Hyun-seung, president of the Korean Securities Association, explained, "If a large volume comes out from the National Pension Service, there will inevitably be aftereffects on the supply-demand side, so they will have to take that into account as much as possible and find an appropriate level."
There is also criticism that this rebalancing deferral has damaged the National Pension Service's operating principles. Nam, the senior research fellow, said, "The risk factors that serve as the default setting for the National Pension Service's fund management are now significantly expanded," noting, "In fund management, risk is defined as the maximum drawdown or the tolerable risk limit, and I question whether the risks the National Pension Service is currently exposed to are truly within that allowable range."
Meanwhile, the replacement of the National Pension Service's fund management chief, now in the selection stage, also appears to be a variable. The National Pension Service is publicly recruiting the next chief investment officer (CIO) to lead the fund management division. Previously, current CIO Seo Won-ju's term ended at the end of last year, but is still performing duties.
An industry official said, "Ordinarily, whoever came in would have managed identically under the operating principles, but now those principles are broken," adding, "With the burden having grown considerably, it will be difficult for either the current CIO or the new CIO to respond aggressively."