South Korea’s National Pension Service (NPS) has sold around 3.12 trillion won (US$2.6 billion) of domestic stocks since August because it was overinvested in the asset class compared to its annual target, according to a local news report.
The pension fund had snapped up 16.8 trillion won of Korean stocks in the second quarter after the market became undervalued in the wake of the coronavirus crisis, The Korea Economic Daily says in a report on September 15, without citing any sources.
As a result, it says the NPS’s domestic stock holdings at the end of June was 17.5% of total assets. This wasn’t in line with the fund’s plan to drop the share to 17.3% by the end of this year from 17.95% in December 2019.
So the NPS has been offloading some of the stocks in recent weeks, including part of its holdings in internet company Kakao Corp, whose share price had surged 148% since the beginning of the year, the report says.
Spokespersons for the NPS did not immediately respond to questions from Asia Asset Management (AAM).
The NPS may believe it’s advantageous to trim its domestic equity position when there is ample liquidity in the market, according to Andrew Shin, director and head of investment services for Korea at fund advisory firm Willis Towers Watson.
Since the NPS’s assets under management are “growing much faster than the speed at which the market grows, it will be more and more difficult to adjust their exposure without influencing the market in the long term”, Mr. Shin tells AAM.
NPS, the world’s third largest pension fund, had $637.27 billion of total assets at the end of 2019.