NPS denies rumors of adjusting targets of domestic equity allocation

South Korea’s largest public pension body, the National Pension Service, on Friday denied local news reports that it was considering reweighting its investment portfolio and raising its domestic stock allocation in contrast with an earlier pledge to cut its exposure.

“The NPS Investment Management Committee does not plan to discuss readjusting its target asset allocation with regards to the hike of domestic equity exposure,” the NPS said in a statement.

The statement rebutted the media reports, which said the NPS would temporarily realign the weight of its portfolio by asset classes to slow down the domestic stock-selling spree.

This came amid calls for the institutional investor, which managed 833.1 trillion won ($736.6 billion) in assets as of 2020, to refrain from dumping domestic equities to rebalance its portfolio under its midterm investment plan.

Korean retail investors expressed disappointment when a selling spree by Korean pension fund operators came under the spotlight amid the recent bearish trend in the stock market.

Korean pension funds, including the NPS, net sold a combined 14.5 trillion won worth of listed equities on the main bourse, Kospi, for 51 straight trading days ending March 12. After a brief recess, pension funds resumed dumping Kospi-listed stocks Wednesday.

Jung Eui-jung, who heads an advocacy group representing some 22,000 stock investors, denounced such moves earlier in March, calling the selling spree an “act of betrayal” against retail investors who also contribute to the NPS.

In 2020 the NPS fell short of rebalancing its portfolio under the allocation target set earlier the same year. It vowed to allocate 17.3 percent of all assets under its oversight to domestic equities under its midterm investment plan. But its domestic stock exposure came to 21.2 percent as of end-2020, in part because the unprecedented rally in Korea left it unintentionally exposed to equities.

The NPS’ Korean stock exposure will be gradually lowered to 16.8 percent by 2021 and to 15 percent by 2025. The NPS also aims to cut its exposure to fixed income. Instead, it plans to increase its allocation to foreign equities and alternative investments.

By Son Ji-hyoung (consnow@heraldcorp.com)