Seoul: South Korea's state pension fund announced it will significantly increase its allocation to domestic equities to 20.8 percent this year, amidst a rise in the local stock market.

According to Yonhap News Agency, the National Pension Service (NPS) fund management committee decided to adjust the target allocation for domestic equities just four months after raising it to 14.9 percent in January. The Korea Composite Stock Price Index (KOSPI) has been one of the best-performing stock indexes globally this year, driven by a rally fueled by artificial intelligence (AI). The index surpassed the 8,000-point threshold earlier in the week, maintaining substantial gains.

The NPS, recognized as the world's third-largest pension fund, stated that the decision to increase the target allocation for domestic equities is influenced by potential structural changes in the local stock market and the rising demand for increased equity exposure.

This strategic move aims to boost the fund's long-term profitability and stability while mitigating the market impact during portfolio rebalancing, as per NPS. The revised allocation plan for domestic equities will be implemented at the end of the upcoming month, coinciding with the expiration of the temporary suspension on portfolio rebalancing. Adjustments will also be made to target allocations in other asset categories.

Under the new plan, the NPS intends to allocate 34.7 percent of its assets to foreign equities, 23.1 percent to domestic bonds, 7.4 percent to foreign bonds, and 14 percent to alternative investments by the year-end.