This article was first published on Signal, the Seoul Economic Daily's capital markets newsletter, at 17:17 on March 26, 2026.
Lee Sran, First Vice Minister of Health and Welfare, outlined a plan to achieve a "Korea Premium" by delegating the National Pension Service's (NPS) voting rights to the private sector to improve corporate governance and enhance shareholder value. She also presented the NPS's issuance of foreign currency bonds as a core policy aimed at stabilizing the foreign exchange market and boosting fund returns.
In an interview with the Seoul Economic Daily on March 26, Lee said, "We will push to launch a pilot program delegating voting rights to the private sector as early as the second half of this year, after obtaining approval from the Fund Management Committee." The NPS Fund Management Committee discussed this month a plan that would allow external asset managers to directly exercise voting rights on their holdings. The key change involves shifting the outsourcing structure from discretionary mandates to a fund-based format. Under the new structure, private asset managers would exercise voting rights directly rather than the NPS doing so itself.
Lee explained the rationale, saying the move would help avoid criticism of "pension socialism" while also improving efficiency. The NPS exercises voting rights at approximately 700 companies every March. The physical limitations of analyzing thousands of agenda items within a single month have long been a point of concern. "Shareholder activities have a significant impact on returns," Lee said. "As the fund has grown, it is often the largest shareholder and faces constraints due to large-holding disclosure obligations." She added, "If institutional investors actively participate, we expect shareholder activism to become more vibrant and criticism of 'pension socialism' to diminish."
Lee emphasized that market skepticism over whether external managers would exercise voting rights more actively than the NPS would be addressed through the pilot program. "We will consult with asset management firms and select those that have actively engaged in shareholder activities," she said. "If we provide guidelines to the external managers and rigorously monitor their shareholder engagement, activating private-sector shareholder activism is not an impossible goal."
Lee also noted that Japan's experience serves as a useful reference. "I believe the strength of the Japanese stock market is the result of more than a decade of sustained effort," she said. "External asset managers played a major role in the corporate value-up process." In practice, Japan's Government Pension Investment Fund (GPIF) delegates all voting rights to private managers. "In Japan's case, they provide detailed guidelines to external managers covering everything from financial metrics such as return on equity to governance structures, board composition, and shareholder returns, and they actively manage compliance," Lee said. "As a result, they succeeded in achieving a market value-up."
The NPS plans to manage investment allocations flexibly to boost fund returns. In January, the Fund Management Committee raised the domestic equity allocation from 14.4% to 14.9% and temporarily suspended the strategic asset allocation (SAA) tolerance band of ±3 percentage points for the first half of the year. "This was a decision made for the fund's returns," Lee said. "In a situation where it is difficult to determine whether the domestic stock market has fundamentally improved or whether this is a temporary phenomenon, we opened up the tolerance band on a short-term basis."
In May, the Fund Management Committee will approve the NPS's medium-term asset allocation plan. The NPS's total assets surpassed 1,000 trillion won for the first time in 2023 and exceeded 1,500 trillion won ($1.1 trillion) earlier this year. "We will allow strategic responses in the short term while developing the asset allocation plan with a long-term investment horizon," Lee said. She also explained, "We will consider market expectations, macroeconomic variables, and other factors through external consultations, but we will negotiate the asset allocation plan based on the unwavering principle of long-term investment."
Lee said, "Asset allocation requires a comprehensive assessment of market trends, national risks, and demographic shifts rather than looking at individual investments." She added, "From that perspective, an economist would be worth considering for the position of NPS Chief Investment Officer." Her reasoning was that the CIO should take a big-picture view while individual division heads handle specific matters.
Lee said the NPS would continue improving compensation for fund managers to boost returns. "We need to expand staff, particularly in the alternative investment division," she said. "During this period of fund growth, we will actively explore improvements to infrastructure and compensation so that managers can invest aggressively."
On the NPS's plan to issue foreign currency bonds, Lee said, "In a year like this when the won-dollar exchange rate has been surging, foreign currency funding has become even more difficult, making it all the more necessary." This is because the NPS's dollar demand can have a significant impact on the market amid heightened volatility. While the NPS can secure funding through currency swaps with the Bank of Korea (BOK), she explained that this has limitations since the funds come from foreign exchange reserves.
