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South Korea’s Pension Fund Sees $90 Billion Stock Decline, Raising Questions Over Oversight
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Stock prices can rise, and they can fall.
But what concerns the public as a whole is the National Pension Fund, which represents the retirement savings of the Korean people.
The National Pension Fund’s total assets increased by 326 trillion won, from 1,540 trillion won in January to 1,866 trillion won in June, before declining by 182 trillion won in just one month to 1,684 trillion won in July.
Of that amount, domestic stock holdings increased by 213 trillion won, from 330 trillion won in January to 543 trillion won in June, before falling by 125 trillion won to 419 trillion won in July.
The proportion of domestic stocks in the fund rose from 21.4% in January to 29.1% in June, before declining to 24.9% in July.
In May, the National Pension Fund Management Committee raised the upper limit for domestic stock holdings from 14.9% to 20.8%. Yet the National Pension Fund failed to comply with even this increased limit in every single month from January through July.
During this period, when the National Pension Fund apparently expected domestic stock prices to rise indefinitely, raised the ceiling on domestic stock holdings, and then failed to observe even the higher ceiling it had set for itself, foreign investors engaged in massive net selling and realized enormous profits.
While foreign investors were engaging in hit-and-run trading, the National Pension Fund alone failed to follow the principles of portfolio rebalancing, resulting in the loss of the Korean people’s retirement savings.
This is a serious problem arising from the violation of the principles of stability, profitability and independence in the management of National Pension Fund assets.
Those responsible must be held accountable.
As for who decided to introduce single-stock leveraged investment products tied to Samsung Electronics and SK Hynix, which contributed to extreme volatility in the stock market, President Lee Jae-myung distances himself from responsibility, saying, “Someone must have made the decision,” as though the matter had nothing to do with him.
When rising stock prices increased the value of National Pension Fund assets, he declared that “there is no need for structural reform of the National Pension System.”
But now that the fund’s assets have declined, he has fallen completely silent.
The National Pension Fund Management Committee is chaired by the Minister of Health and Welfare and consists of vice ministers from relevant government ministries, representatives of employers, workers and pension subscribers, and experts.
Who exactly decided to raise the upper limit on domestic stock holdings, and why?
Who caused enormous losses to the National Pension Fund by undermining the principles of portfolio rebalancing?
Was there political pressure from outside?
The truth must be thoroughly investigated, and those responsible must be held accountable.
During the Park Geun-hye administration, the Minister of Health and Welfare and the head of the National Pension Service’s fund management division were sentenced to prison for their roles in the exercise of the National Pension Fund’s voting rights in the merger between Samsung C&T and Cheil Industries, which was found to have involved pressure from political authorities and the government.
In the aftermath, South Korea lost an investor-state dispute settlement (ISDS) case brought by the U.S. private equity fund Elliott and was ordered to pay more than 150 billion won in compensation.
Now, an enormous incident has occurred that has inflicted damage on the Korean people on a scale far greater than that case.
The truth must be uncovered, and legal responsibility must be pursued.
Only then can we prevent those in power from ever again recklessly gambling with the retirement savings of the Korean people.
#SouthKoreaPensionFund #PensionFundOversight #InvestmentAccountability
* This article has been translated by ChatGPT.