Minister Jung Eun-kyeong of the Ministry of Health and Welfare said regarding the recently launched "National Pension New Framework" (New Framework·new framework), "The Ministry of Health and Welfare and the National Pension Service also have demand for it." She offered this explanation as criticism mounted that the National Pension Service was being mobilized to stabilize the exchange rate at the expense of profitability.
The Minister said at a year-end press briefing on the 1st, "The National Pension Service may influence the exchange rate, but the National Pension Service is also greatly affected by the exchange rate," adding, "I agree that it is time to consider how to manage pension operations as circumstances change."
The Minister said, "The idea is not to mobilize the National Pension Service for exchange rates in the short term," adding, "It is time to manage exchange rates and overseas asset investment risks in the long term."
Academia is also concerned about the National Pension Service's profitability issues arising from the interaction between expanded overseas investment and exchange rate volatility. Kim Kyung-hoon, a professor in the Department of Economics at Hongik University, said in the recent "Pension Forum – Fall issue" published by the National Pension Research Institute, "A weaker won (a rise in the won-dollar exchange rate) can raise valuation gains on overseas assets in the short term, but at the same time, sharp exchange rate swings increase hedging expense and carry the risk of undermining the stability of long-term returns," adding, "A flexible currency-hedging strategy is important."
The Minister also noted that the National Pension Service's domestic and overseas asset allocation strategy needs to be reviewed. The Minister said, "This year, the rate of return through domestic stocks reached about 45%, but last year, the rate of return from overseas stocks was high," adding, "We need to discuss the asset allocation strategy to reflect the changed environment."
The Minister said, "Establishing the 'four-party consultative body for exchange rate response' (Ministry of Economy and Finance·Bank of Korea·Ministry of Health and Welfare·National Pension Service) means beginning discussions on the grand principles," adding, "Through joint research, it should be seen as creating and consulting on the evidentiary materials for the National Pension Service Fund Management Committee to ultimately make decisions."