South Korean Pension Fund Will Buy US Dollars to Boost Sinking Won

The gambit is designed to help the nation’s currency in a deal engineered by its central bank.


To bolster the sagging South Korean won, the nation’s central bank, the Bank of Korea, has struck an agreement with the National Pension Service of Korea to acquire up to $35 billion in U.S. dollars outside foreign exchange markets, Reuters reported.

The South Korean currency has lost 8% of its value over the past two months, and the dollar infusion into its monetary system is aimed at bolstering the won. The greenback, while slipping itself, still is regarded as the world’s strongest currency.

After the announcement, the won bumped up slightly in relation to the dollar. By making the currency exchange outside the markets, the idea is evidently to avoid fluctuations that could weaken the stratagem’s impact.

South Korea’s currency has suffered from a trade deficit largely linked to shrinking sales of its sizable semiconductor industry. Tensions with North Korea and volatile capital markets globally also have been headwinds. These factors have prompted many South Koreans to exchange won to buy dollar-denominated assets, viewed as refuges in unsettled times.

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South Korea, the world’s 10th  largest economy, is heavily dependent upon exports. National officials hope that China’s re-opening after its pandemic lockdown will reinvigorate its imports from South Korea.

The Bank of Korea had a previous, smaller ($10 billion) arrangement with the huge pension fund, which expired at the end of 2022.

The NPS is the world’s eighth largest pension fund, with $680 billion in assets as of year-end 2022. South Koreans can participate in it to supplement their income from the nation’s Social Security-like retirement payments. Aside from securities, the program also invests in private equity, venture capital and  real estate.

The fund suffered an 8.2% investment loss last year amid plunging markets worldwide. Some 28% of its portfolio is in foreign stocks and 8% of its bond holdings are from overseas.

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Finnish Pension Fund Invests More Than $2 Billion in Climate-Focused ETF

Ilmarinen investment helps make the ETF launch the largest in U.S. history.

 


Finnish pension fund Ilmarinen has invested approximately 1.86 billion euros ($2.06 billion) in the Xtrackers MSCI USA Climate Action Equity ETF, helping to make it the largest ETF launch in U.S. history.

“This fund will cost-effectively provide us with a broad diversification into the best U.S.-listed companies in terms of the climate,” Ilmarinen CIO Mikko Mursula said in a release. “In addition, the fund supports us in our goal of a carbon-neutral investment portfolio by the end of 2035.”

The fund is intended for investors looking for exposure to large- and mid-cap U.S. companies that are considered leaders within their sectors in taking action relating to climate transition. The investment in the ETF incorporates existing investments Ilmarinen has in an Xtrackers ETF fund that it helped launch in 2019.

The ETF uses a passive index investing investment approach and seeks investment results that generally correspond to the performance of the MSCI USA Climate Action Index, before fees and expenses. Companies from the parent MSCI USA Index are assessed relative to their sector peers based on their emissions intensity, emissions reduction commitments, climate risk management and revenue from green companies.

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Meanwhile, the underlying index uses this assessment to choose half of the companies from each global industry classification standard sector of the parent index. Overall, the underlying index targets a coverage of 50% of the companies from each GICS sector from the parent index.

According to Ilmarinen, it got involved in developing the index because there were no widely diversified climate indexes suitable for the pension fund available on the market.

“This is the first ETF on the market to track the new index,” Mursula said. “With this investment, we can manage climate risk, get exposure to transition related opportunities, and align with our climate goals.”

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