South Korea’s National Pension Service, the world’s third-largest public pension fund with roughly $1 trillion in assets under management, has stopped its foreign exchange hedging operations. The move comes as the Korean won has strengthened significantly against the dollar, reducing the fund’s perceived need to protect against currency risk on its massive overseas portfolio.
What the NPS actually changed
The pension fund’s hedging strategy works on a trigger system. When the won-dollar exchange rate dropped from above 1,450 to below the mid-1,300s, the NPS effectively waived its hedging requirements. In plain terms: the won got strong enough that the fund no longer felt compelled to sell dollars or enter forward contracts to offset currency exposure on its international investments.
The NPS had recently bumped its strategic hedging ratio from a prior cap of 10% up to 15%. That ratio represents the share of overseas assets the fund actively hedges against currency swings. In April 2026, the fund formalized a restructured hedging policy designed to give it more flexibility in how and when it executes that 15% baseline.
To execute its hedging, the NPS typically uses dollar forwards or swaps arranged through the Bank of Korea. These instruments effectively inject dollars into the onshore FX market, which tends to support the won during periods of weakness. When hedging pauses, that dollar supply dries up, which can actually increase net dollar demand from the NPS’s overseas investment flows.
