Asian pension funds adjust investment and hedging strategies

Major Asian pension funds are adjusting their management strategies in response to shifting market conditions and currency fluctuations.

Thailand’s Government Pension Fund (GPF) is transitioning from a traditional strategic asset allocation model to a hybrid Total Portfolio Approach (TPA). Under the leadership of new secretary-general Soraphol Tulayasathien, the fund will treat investments as a single portfolio to better manage risks such as inflation, economic growth, and geopolitical instability. The GPF aims to preserve principal and achieve long-term returns that outperform inflation by 2-3% annually. The fund plans to restructure its risk-management teams through 2026, with a comprehensive strategy expected in 2027.

In South Korea, the National Pension Service (NPS), which manages approximately $1 trillion in assets, has paused its foreign exchange hedging operations. This decision follows a significant strengthening of the Korean won against the US dollar. The NPS utilizes a trigger system for hedging; as the won-dollar exchange rate dropped below the mid-1,300s, the fund waived its hedging requirements. While the NPS recently increased its strategic hedging ratio to 15%, the current strength of the won has reduced the perceived need to protect its massive overseas portfolio against currency risk.