National Pension Service: "Postponing Rebalancing Generated Excess Returns" [2026 Parliamentary Audit]

NPS submits simulation data on a rebalancing scenario
Health and Welfare Committee Chair Lee Manhee criticizes NPS at parliamentary audit

The National Pension Service said it generated excess returns by unusually postponing rebalancing during the sharp rise in the KOSPI in the first half of this year.

According to materials submitted by the National Pension Service, National Assembly Health and Welfare Committee Chairman Lee Man-hee of the People Power Party said at a parliamentary audit on October 14 that the NPS had stated, "We estimate that the fund generated excess returns from February through June this year, when rebalancing was postponed, compared with what it would have earned had rebalancing not been postponed. Excess returns are also estimated based on the figures available at the end of July this year, when the fund's return was disclosed." The NPS's total return from the start of the year through the end of July was 14.84%.

The NPS added a caveat, saying, "However, estimates of the opportunity cost are sensitive to changes in stock prices, interest rates and exchange rates, and vary greatly depending on the estimation period, so they should be interpreted with caution."

Earlier that morning, at the parliamentary audit, Assemblyman Lee had asked Lee Gyu-hong, the NPS's chief investment officer (CIO) and director of the National Pension Fund, to submit materials showing the results of a hypothetical scenario in which rebalancing had not been postponed. Lee agreed, but National Pension Service President Kim Seong-ju said, "Mr. Lee has not been in the role long, so there are aspects of the work he has yet to familiarize himself with," adding, "We will discuss whether to disclose the materials and provide an answer."

Assemblyman Lee strongly criticized the postponement of rebalancing, calling it a major blunder. "During the overheated stock market in May and June this year, foreign investors sold nearly 170 trillion won worth of assets, and individual investors absorbed all of it," he said. "The National Pension Service should have helped cool the overheated market at the time by rebalancing."

He also called for greater transparency in the NPS's decision-making process. "We could consider substantially automating or legislating the rebalancing rules," Lee said, adding, "We also need to restructure the Fund Management Committee, which is heavily weighted toward government representatives, and introduce measures to prevent certain financial firms from receiving a disproportionate share of contracts."

This content was produced with the assistance of AI translation services.