(National Pension Fund Investment Guidelines) The Validity of Using the National Pension Fund for Currency Hedging

(This is the Pension Future Forum's position on the National Pension's currency hedging.)

Under the pretty name of the "new framework," the policy authorities' imposition of currency hedging on the National Pension appears to be causing a certain degree of cost loss!

The minimum amount of loss would be the gap between the Korean and U.S. policy rates, roughly 1.25 percentage points, but given that the won's value is expected to decline, the situation being what it is,it will likely turn out to be "1.25 plus alpha,"

and in a situation like the present, this alpha figure is unlikely to be small.

Above all, the cumulative losses from currency hedging could turn out to be a massive amount!

Aimed at ordinary stock investors, YouTubers, too, say that in the case of pensions, not hedging currency risk is better — that is what they are emphasizing.

A report by the National Pension Research Institute, under the National Pension Service, has likewise recommended not hedging currency risk, as its conclusion.

By hedging when it did not need to, selling off dollar-denominated assets, and using the resulting National Pension fund to keep buying domestic stocks,

as a result of this, in the domestic stock market it seems likely to create a considerable bubble.

This is simply to say that the economic logic works out that way!