South Korea's bureaucrats Friday tweaked the range they'll allow the national pension system to stray from its strategic and tactical domestic equity allocation targets to ease the rebalancing pressure the pension fund's investment team has faced due to the country's market's torrid bull run over the past 12 months.
The Ministry of Health and Welfare's National Pension Fund Management Committee issued a statement saying the "allowable range" for the 855.3 trillion won ($763.7 billion) National Pension Service to deviate from its strategic asset allocation target for domestic equities before having to rebalance would be raised to 3 percentage points from 2 percentage points.
At the same time, the permissible deviation from the fund's tactical asset allocation targets for domestic equities was lowered to 2 percentage points from 3, effectively leaving the combined room to exceed or trail the fund's targets unchanged at 5%.
The NPS's website listed the fund's near-term domestic equity allocation target as 16.8% of the portfolio by the end of 2021. As of Jan. 31, the most recent month for which allocation figures are available, domestic equities accounted for 21% of the portfolio.
After a painful start, South Korea's relative success in containing the coronavirus pandemic last year helped power its benchmark stock market index to a stellar 30.8% gain for 2020.
And the good times have continued to roll during the current year, with the KOSPI index up roughly 9%, second only in the region to Singapore's roughly 12% gain.
The National Pension Fund Management Committee's statement noted that after having to rebalance its domestic equity holdings only four times between 2016 and 2018, the NPS investment team was forced to do so four times in 2019, twice in 2020 and thrice already during the first quarter of 2021.
