On the 26th, the National Pension Fund Committee held a meeting at the Westin Chosun Hotel in Jung-gu, Seoul, and discussed the’Review of the National Pension Fund’s Target Weight Maintenance Rule (Rebalancing)’, but could not conclude. Hyung-Hoon Lee, Director of Pension Policy at the Ministry of Health and Welfare, said at a briefing immediately after the meeting, “The agenda on the rebalancing rule change will be carefully reviewed according to market conditions and operational results, and will be discussed again at the next fund.”
Regarding the background on which the agenda was discussed, Director Lee said, “In particular, due to volatility that has occurred since last year, there is a need for adjustment in situations where the Strategic Asset Allocation (SAA) limit is deviated or spans the limit.” He said, “There was a difference in positions between the committee members on whether it was a temporary phenomenon caused by the increase in stock market volatility after the end of the year or whether there was a structural change in the market,” he said. “Before making a judgment, it is necessary to supplement the data on the market situation and fund management. It was concluded that it was,” he explained.
The core of the rebalancing review plan discussed by the Fund on this day is that the National Pension Service’s target of 16.8% of domestic stocks this year remains intact, and the SAA allowable range, which is a problem within ±5% of the total allowable range, is ±3.0 to 3.5% from the current ±2% point. It is a part that increases with. It was expected that if the SAA allowed range was widened, the national pension would be able to stop selling domestic stocks to some extent, as long as the stock price does not rise further because the limit is freed.
When the fund committee withheld the decision, individual investors are protesting. In the internet community, there were a lot of criticisms of the fund, such as, “I’m asking you to only stop mechanical selling, is that difficult? I’m disappointed” and “Would you like to manage your own money like this?”
In principle, the national pension must meet its target weight. However, by combining the allowable range of SAA and tactical asset allocation (TAA), domestic stocks are allowed up to ±5% points. At this time, SAA gives ±2% points and TAA gives ±3% points. In other words, as of this year, the share of domestic stocks cannot exceed 21.8%, and the allowable range of SAA cannot exceed 18.8%.
By the end of last year, the national pension’s share of domestic stocks reached 21.2%. Accordingly, the National Pension Service has sold about 15 trillion won in domestic stocks in the KOSPI and KOSDAQ markets this year, reducing the share of domestic stocks to 19%. However, the SAA limit is still close to the head. It is explained that if the SAA limit is not increased, a mechanical sale will occur if the share price remains current or even slightly increases.
Yoo-jin Choi, researcher at Shinhan Investment Corp. said, “If the proportion of a specific asset falls outside the SAA allowable range based on the target weight, it mechanically makes a sell (buy) transaction until it returns to the upper or lower end of the allowable range.” Revealed.
It is reported that the National Pension Service has internally created multiple proposals to expand the SAA allowance range and reported it to the Fund. If the SAA widens, the national pension’s domestic stock price rises, and if it deviates from the target weight, the allowable range increases, which could stop mechanical selling.
However, there are also drawbacks. In 2010, when the Fund Committee decided on the acceptable range of SAA and TAA, the National Pension Service Evaluation Committee said, “There is a disadvantage that there is a high possibility that the target weight of asset allocation determined by the Fund is not achieved.”
Since the fund committee’s decision has been postponed by a month or so, if the current SAA limit is applied, the share of domestic stocks in the national pension cannot exceed 18.8%. Considering that the share of domestic stocks in the national pension remains at the 19% range, it is expected that additional selling for a month is inevitable.
[문지웅 기자 / 문가영 기자]
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