▲ Bank of Korea
The Bank of Korea (BOK) is scaling back its entrusted investments in advanced nation stocks managed by domestic asset managers while expanding bond entrustments. At the same time, it is shifting its existing U.S. aggregate bond strategy to a "Global Aggregate" strategy that broadens the scope to include more target countries and currency zones.
While the central bank has previously expanded the scale and sectors of its entrustments to broaden the overseas investment foundation for domestic asset managers, its new policy focuses on boosting practical management capabilities by offering higher fees for more complex, high-difficulty strategies.
The BOK announced today (September 16) that it is restructuring its foreign currency asset entrusted management portfolio for domestic asset managers along these lines.
Since first entrusting Chinese stock management to domestic asset managers in 2012, the BOK has expanded its entrusted sectors to include advanced nation stocks in 2019 and U.S. aggregate bonds in 2022.
Entrusted principal also grew from 100 million dollars in 2012 to 3.21 billion dollars in 2025.
The BOK assessed that these efforts have largely achieved the initial policy goal of "establishing a quantitative foundation," enabling domestic asset managers to build overseas investment infrastructure and accumulate global management experience. Moving forward, the bank plans to focus on substantive "enhancement of management capabilities."
The BOK explained that overseas stock funds currently entrusted to domestic asset managers closely resemble passive strategies that simply track benchmarks, limiting the accumulation of advanced management expertise.
Consequently, the BOK plans to reduce the entrusted share of advanced nation stock funds while increasing support for bond funds.
With this restructuring, around 1 billion dollars of the advanced nation stock entrusted funds managed by three domestic asset managers will be reallocated to bonds.
The specific scale will be finalized following consultations with the respective asset managers.
However, this adjustment involves rebalancing the entrusted ratio between domestic and foreign asset managers within the BOK's overall foreign currency asset allocation framework, leaving the total ratio of stocks to bonds unchanged.
Cho Suk-bang, head of the Foreign Exchange Planning Department at the BOK, explained, "We are reducing a portion of global stocks managed by domestic asset managers and transferring it to global aggregate bond funds. This does not involve converting funds into the South Korean currency to flow out, but rather executing transitions between foreign currency assets overseas."
In addition, the BOK is transitioning its U.S. aggregate bond strategy to a "Global Aggregate" strategy, significantly expanding the target countries and currency zones.
Based on representative benchmarks, while the U.S. aggregate bond strategy targets a single country with about 10,000 issues, the global aggregate bond strategy covers approximately 28 countries and about 30,000 issues.
Because managers must simultaneously handle bonds from multiple countries and diverse currency zones, the management difficulty is notably higher compared to the U.S. aggregate bond strategy, according to the BOK.
Cho stated, "Since managers must actively navigate differences in macroeconomic conditions and monetary policies across countries, we expect qualitative growth among domestic asset managers."
The BOK also noted that the management fees paid to domestic asset managers will more than double compared to previous levels.
Moving forward, the BOK plans to actively encourage domestic asset managers to expand their active management capabilities, compete on equal footing with global asset managers, and ultimately leap forward as global players in the mid-to-long term.
Cho emphasized, "Once this measure stabilizes, we believe domestic asset managers will be able to establish themselves as global players. If necessary in the future, we plan to continue our efforts to strengthen the capabilities of domestic financial institutions through additional measures."
(Photo courtesy of Bank of Korea, Yonhap News)
※
Copying, redistribution, and unauthorized use in AI training are strictly prohibited.