As the South Korean won trades at lower values against the dollar, the government is set to overhaul the performance evaluation criteria for the National Pension Service (NPS) to mitigate the impact of currency fluctuations. Currently, when the won depreciates, the evaluation of investment performance can appear artificially inflated, as returns are reported in won and higher exchange rates can lead to misleading assessments of profit. Authorities have noted that last year, around 8% of the NPS's reported 20% return was attributable to currency effects alone, raising alarms about the possibility of distorted investment incentives leading to a decline in the won's value.

A spokesperson from the Ministry of Health and Welfare indicated that following external critiques regarding the potential for the performance evaluation structure to accidentally encourage currency depreciation, a review of the established framework is underway. The issue gained prominence amidst increasing volatility in currency markets last year, prompting the Presidential Office to direct relevant departments to amend operational guidelines. As the performance evaluation system previously employed absolute measures based on consumer price inflation rather than benchmarks, this shift aims to counter the adverse effects of currency fluctuations on performance rewards.

Critics have expressed concerns that this framework could dissuade the NPS's asset managers from taking protective measures against currency risks, potentially leading to riskier investments in foreign assets, thereby increasing vulnerability to global market fluctuations. With the pension fund nearing 1500 trillion won, representing about half of the country's GDP, the implications of these policies are significant, suggesting a pressing need for a robust review of the operational incentives of one of the nation's largest financial entities to ensure sustainable investment returns without exacerbating currency valuation issues.