Won Fall May Prompt Action, Korea’s $1 Trillion Pension CEO Says

qe[ra39o}gn28neswbk)b9j1_media_dl_1.png National Pension Service

Article content

(Bloomberg) — The South Korean won’s weakness against the dollar during recent market turmoil may require action to stabilize it, the chief of the nation’s largest pension fund said.

Article content

Rejecting the notion that the currency’s recent dip to the 1,500-per-dollar level represents a “new normal,” National Pension Service Chairman and CEO Kim Sung-joo said in a Friday interview that he views the low 1,400s as a more appropriate equilibrium. The won has fallen about 5% against the dollar this year to 1,514.25, among the worst performers in Asia.

Article content

Article content

Article content

NPS’s ongoing talks with financial authorities on a new framework to improve fund performance and stability in the foreign exchange market are expected to conclude shortly, with proposals to be adopted if the parties agree, Kim said. Another issue under review is the fund’s strategic hedging used to help stabilize the won, he added. 

Article content

Article content

“The continued weakness of the won is something we don’t fully understand either,” said Kim, whose fund manages about $1 trillion in assets. “We’ve long recognized the need to respond to FX movements, and there’s now a shared view that some form of action may be needed following the recent surge.”

Article content

Kim’s remarks highlight the uneasy balancing act facing global investors as surging oil evokes fear of stagflation and strains in private credit rattle markets. With asset values sliding, Korea looks to be especially exposed, given its heavy reliance on imported energy and its critical role in the artificial intelligence supply chain, where returns on massive investment remain uncertain. 

Article content

As one of the world’s largest pension funds, NPS’s moves are closely watched. The fund posted record gains of 18.8% last year, driven largely by a domestic stock rally. Kim, who previously served a three‑year term from 2017 to 2019, returned late last year to lead an organization facing markedly different challenges. It has roughly doubled in size since his first term, and the Iran war shows no signs of easing.

Article content

Article content

“Compared with other countries, we’re seeing relatively greater impact from the conflict,” he said. “In response, we’ve been operating internal crisis‑response teams.” 

Article content

Considerable Challenges

Article content

Despite the urgency, the fund is not making major changes to asset allocation or investment strategy, but is making targeted adjustments to reduce the impact on specific areas.

Article content

Kim said NPS is facing “considerable challenges” for returns due to the Iran war, though its exposure to the Middle East remains relatively limited. 

Article content

“The Korean economy, especially the stock market, has been heavily affected by the conflict, and that’s having a meaningful impact on our returns,” he said. 

Article content

The fund is also monitoring “structural vulnerabilities” in the global private credit market, where losses at some asset managers and redemption suspensions have raised concerns. NPS has no direct exposure to the affected funds, Kim said. 

Article content

NPS and sovereign wealth fund Korea Investment Corporation together have more than 18 trillion won ($11.9 billion) of investment in private credit, according to the Financial Supervisory Service.