South Korea's National Pension Service (NPS), the world's third-largest public pension fund, has paused its foreign exchange hedging operations. This decision was driven by the significant strengthening of the Korean won against the US dollar, which reduced the need to protect the fund's overseas portfolio from currency risks.
The fund operates on a trigger-based system. Hedging was waived when the won-dollar exchange rate fell from above 1,450 to below the mid-1,300s. The NPS is expected to resume hedging activities if the exchange rate spikes back above 1,550.
The NPS manages approximately $1 trillion in total assets, with around $530 billion in foreign holdings. Recently, the fund increased its strategic hedging ratio from a 10% cap to 15%, formalizing a restructured policy in April 2026 to allow for greater flexibility in executing this baseline.
To implement hedging, the NPS uses dollar forwards or swaps via the Bank of Korea. The fund also has access to $65 billion in extended currency swap lines with the Bank of Korea, which remain available through the end of 2026.