The 'big hand' National Pension Service (NPS) will establish a mid-term asset allocation plan for 2026-2030 just before the early presidential election on June 3. Capital market participants are paying attention to whether the NPS will continue its trend of expanding overseas investments and reducing domestic investments. This is because there have frequently been calls from the political sector to increase the National Pension's domestic stock investments. Given the sensitive timing, there are projections that the NPS's decision-making may also be influenced directly or indirectly.
The National Pension Fund Management Committee (NPS) the highest decision-making body regarding the operation of the National Pension Fund will hold its '3rd meeting of 2025' in May to adopt the mid-term asset allocation plan for 2026-2030. The plan will include target revenue rates and target proportions for asset classes based on domestic and international economic forecasts, expected revenue rates by asset type, and risk factors.
At the 2nd meeting held on April 17, the Committee decided to finalize the mid-term asset allocation plan at the May meeting, reflecting the government's pension reform proposals and the International Monetary Fund (IMF) economic growth rate forecasts. Greg Kyuhong, Chair of the Committee (Minister of Health and Welfare), noted, "The uncertainty in both domestic and international financial markets is intensifying," and requested efforts to ensure stable management of fund revenue.
The NPS has been increasing its share of overseas and alternative investments to maximize fund operation revenue. This trend is expected to continue this year. However, some market observers are focused on whether the NPS will continue its policy of reducing its domestic stock share. This is because politicians aiming for the presidency have promised to stimulate the stock market by mentioning the utilization of the National Pension.
Notably, Kim Dong-yeon, who ran in the Democratic Party of Korea presidential primary, pledged to inject more than 500 trillion won of public funds, including the National Pension, into the domestic stock market for growth. Specifically, he stated that the share of public funds invested in domestic stocks, including the National Pension (1,150 trillion won), retirement pensions (400 trillion won), and the pension fund investment pool (64 trillion won), would be increased by more than double.
Lee Jae-myung, the Democratic Party candidate for this presidential election, has not mentioned the National Pension yet. However, in the previous election, he referenced the National Pension's "patriotic investment." At that time, he stated, "The investment share of domestic stocks by Japan's Government Pension Investment Fund (GPIF), the world’s largest pension fund, is 24.92%," and added, "I will increase the NPS’s domestic stock investment share, which is around 15-16%."
In this presidential election, the candidate stated, "I will usher in an era where the KOSPI index reaches 5000," and laid out promises for enhancing corporate governance transparency, unveiling an economic and industrial growth roadmap, activating the split voting system, strengthening split listing requirements, and inclusion in the MSCI developed market index. A financial investment industry representative noted, "As Japan's domestic investment by the GPIF is mentioned as a factor in the success of Japan's value-up policy, the candidate may later advocate for the role of pension funds."
The Japanese stock market, which had suffered for a long time after the bubble economy collapsed, began to regain strength in 2012 when Prime Minister Shinzo Abe promoted "Abenomics." As part of the stock market stimulation measures, the Japanese government increased the GPIF's domestic stock share from 11.5% at the end of 2010 to 24.7% at the end of 2013.
According to the Capital Market Research Institute, based on the total return index (TSR) considering actual reinvestment of dividends, Japan's stock index increased by 297% over the past 10 years (from the end of 2012 to the end of 2023), the highest among major countries' stock markets. During the same period, Korea's index rose by 61%. This means that the real return rate considering dividend investment revenue was five times higher in Japan than in Korea.
The target for the share of domestic stocks in the National Pension Fund, which was around 20% in 2017, is set to reduce to 13% by the end of 2029. The target share of domestic stocks set by the Committee in May of last year for the end of 2025 is 14.9%. A source from the asset management industry stated, "If the Committee maintains the domestic stock share at this year's level (14.9%) next year, the market will perceive it as a message similar to increasing the domestic stock share."
Recently, the Ministry of Health and Welfare appointed Lee Tae-hwan, Deputy Chair of the Korean Confederation of Trade Unions, as a Commissioner of the Committee, which had remained vacant since the dismissal of former Deputy Chair Yoon Taek-geun in March 2023. This appointment fills the position after two years. The ministry warned against broad interpretations, but the labor sector protested, claiming that the government had excluded the Korean Confederation of Trade Unions until the impeachment of former President Yoon Suk-yeol.
A senior official in the financial investment industry stated, "The government and the Committee provided grounds for the decisions being interpreted politically." He added, "We cannot help but watch how the mid-term asset allocation plan for 2026-2030 will be determined."