From Exchange-Rate Defense to Stock-Market Support to Corporate Oversight — Has the National Pension Become a "Risk Solver," and Is This Sustainable?

Mounting Pressure on the National Pension to Stabilize the Exchange Rate, Support the Stock Market, and Monitor Corporations As the Pension Is Burdened with Policy Mandates, Will Its Operational Independence and Profitability Be Undermined?

Analyses have emerged suggesting that several measures under consideration by the National Pension to stabilize the exchange rate may in fact be detrimental from the perspective of fund investment returns. A representative example is strategic currency hedging, whose ratio is currently under discussion for an increase. While strategic currency hedging can reduce short-term exchange-rate volatility, if won depreciation persists over the long term, the currency gains that the National Pension would otherwise realize would diminish — a structure in which the National Pension's rate of return would also decline. Recently, the Ministry of Health and Welfare's consideration of issuing foreign-currency bonds has similarly been flagged as a measure that could increase the fund's liabilities and lead to additional burdens such as interest costs.

Professor Hyun Jeong-hwan of the Department of International Trade at Dongguk University, speaking at a Pension Future Forum seminar, warned that "harmonizing foreign exchange market stability with the profitability of the National Pension is not consistent with the pension's purpose and raison d'être," adding that "instrumentalizing the National Pension for foreign exchange policy would simultaneously undermine both profitability and stability, potentially accelerating the timeline to fund depletion."

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