This article was published at 16:18 on May 20, 2026 on Signal, the capital markets compass.
Korea's pension funds and mutual aid associations have sold more than 5.7 trillion won worth of domestic stocks this year, data showed. Analysts attribute the selling to breaches of preset equity allocation ceilings as the Kospi has surged more than 70% this year alone. Critics say the mechanical rebalancing has eliminated pension funds' traditional role as a market backstop during sharp declines.
According to the Korea Exchange on May 20, domestic pension funds had net-sold 5.738 trillion won worth of shares year-to-date as of the day. With the Kospi's continued rally since last year inflating valuation gains, the funds had no room to add positions under their asset allocation plans and ended up trimming holdings in a rising market. Pension funds and institutional investors typically buy into rallies to maximize returns and sell into declines to minimize losses — the opposite of their current behavior.
The problem is that even after offloading more than 5 trillion won, pension funds remain over their allocation limits. An official at one mutual aid association said, "We currently have no capacity to add positions, and we're considering gradually reducing the stocks we hold."
As a result, pension funds have effectively abandoned their "closer" role of buying blue chips during sharp selloffs to dampen volatility and stabilize the market. According to the Korea Exchange, the Kospi, which fell as low as 7,053.84 intraday, closed at 7,208.95, down 62.71 points, or 0.86%, from the previous session. Pension funds net-sold 151.7 billion won. They were net sellers on seven of the eight trading days from May 8 through May 20, with the only exception being May 18. Over that stretch, the Kospi touched 8,000 intraday before its 7,000 line came under threat.
