Rejecting the notion that the currency’s recent dip to the 1,500-per-dollar level represents a “new normal,” National Pension Service Chairman and CEO Kim Sung-joo said in a Friday interview that he views the low 1,400s as a more appropriate equilibrium. The won has fallen about 5% against the dollar this year to 1,514.25, among the worst performers in Asia.
NPS’s ongoing talks with financial authorities on a new framework to improve fund performance and stability in the foreign exchange market are expected to conclude shortly, with proposals to be adopted if the parties agree, Kim said. Another issue under review is the fund’s strategic hedging used to help stabilise the won, he added.
“The continued weakness of the won is something we don’t fully understand either,” said Kim, whose fund manages about $1 trillion in assets. “We’ve long recognised the need to respond to FX movements, and there’s now a shared view that some form of action may be needed following the recent surge.”
Kim’s remarks highlight the uneasy balancing act facing global investors as surging oil evokes fear of stagflation and strains in private credit rattle markets. With asset values sliding, Korea looks to be especially exposed, given its heavy reliance on imported energy and its critical role in the artificial intelligence supply chain, where returns on massive investment remain uncertain.
As one of the world’s largest pension funds, NPS’s moves are closely watched. The fund posted record gains of 18.8% last year, driven largely by a domestic stock rally. Kim, who previously served a three‑year term from 2017 to 2019, returned late last year to lead an organisation facing markedly different challenges. It has roughly doubled in size since his first term, and the Iran war shows no signs of easing.
“Compared with other countries, we’re seeing relatively greater impact from the conflict,” he said. “In response, we’ve been operating internal crisis‑response teams.”
Considerable Challenges
Despite the urgency, the fund is not making major changes to asset allocation or investment strategy, but is making targeted adjustments to reduce the impact on specific areas.
Kim said NPS is facing “considerable challenges” for returns due to the Iran war, though its exposure to the Middle East remains relatively limited.
“The Korean economy, especially the stock market, has been heavily affected by the conflict, and that’s having a meaningful impact on our returns,” he said.
The fund is also monitoring “structural vulnerabilities” in the global private credit market, where losses at some asset managers and redemption suspensions have raised concerns. NPS has no direct exposure to the affected funds, Kim said.
NPS and sovereign wealth fund Korea Investment Corporation together have more than 18 trillion won ($11.9 billion) of investment in private credit, according to the Financial Supervisory Service.
“With recent warning signs, many funds, including NPS, are working on response measures,” he said. “For now, we are continuing to monitor the situation rather than making immediate allocation changes.”
With the won’s prolonged depreciation, discussions are underway on whether additional measures may be needed. Kim reiterated that an option under consideration is issuing foreign currency bonds to diversify funding sources, which would require revisions to the National Pension Act. Preparations are already in progress in anticipation of legislative changes, he said.
“The most important thing, in my view, is that this war does not drag on,” he said.
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