National Pension Service to Raise Currency Hedging Limit for Overseas Assets to 20%

Amidst recent worsening exchange rate volatility, the National Pension Service is raising its currency hedging limit for overseas asset investments to a maximum of 20% and plans to issue foreign currency bonds to more safely protect its overseas investment assets and stably secure foreign currency funds. On the 14th, the National Pension Service Fund Management Committee held its third meeting and deliberated and approved an overseas investment improvement plan to raise the strategic currency hedging ratio from the current 10% to 15%. When adding tactical hedging (5%), currency hedging for up to a maximum of 20% of total foreign currency assets has become possible. The Fund Management Committee explained that this decision to expand currency hedging is to prevent currency losses due to recent increased exchange rate volatility, mitigate the volatility of the National Pension Service portfolio, and stably procure foreign currency for overseas investment.

While pursuing the issuance of foreign currency bonds to diversify foreign currency procurement methods, a New Framework Planning Group involving four institutions including the Ministry of Health and Welfare, Ministry of Economy and Finance, National Pension Service, and Bank of Korea has agreed to operate a discussion body on a regular basis.

The National Pension Service is reviewing plans to introduce a currency-neutral system by examining its performance evaluation framework and also reviewed the process of establishing a mid-term asset allocation plan to be applied from 2027 to 2031.

Minister of Health and Welfare Chung Ho-young stated the need to consider the mutual impact between fund management, the macroeconomy, and foreign exchange and financial markets.