GPFG vs Korea's NPS: Why Norway's Fund Holds Zero Domestic Stocks (And Korea Doesn't)

Most pension funds around the world deliberately avoid overweighting their own country's stock market — Norway's sovereign wealth fund holds none of its domestic equities at all, and Canada's CPP caps domestic exposure around 12%. Korea's National Pension Service has historically followed the same logic, steadily cutting its domestic equity target every year since 2020. Then, in the middle of 2026's record market volatility, it did the opposite — and the meeting minutes explaining why won't be public for four years.

Table of Contents

• Sharpe vs. Sortino: Why Most Pension Funds Choose Differently
• Why Home-Country Stocks Are Uniquely Risky for Pension Funds
• How Norway and Canada Handle This Risk
• The NPS's Own Gradual Retreat from Domestic Equities
• 2026: The Target Gets Raised Instead of Rebalanced
• A Four-Year Disclosure Delay
• Why This Matters for Korean Market Dynamics
• Bottom Line

Sharpe vs. Sortino: Why Most Pension Funds Choose Differently

As covered in our earlier piece on VaR and Sharpe ratios driving foreign selling of Korean equities, the Sharpe ratio treats all volatility — both upside and downside — as risk. Most pension funds globally instead favor the Sortino ratio, which only counts downside volatility as risk, excluding upward price movements entirely, since a stock jumping in value isn't a threat to a fund's obligations.
This distinction matters specifically for pension funds because their real risk isn't price volatility itself — it's failing to meet the target returns needed to pay out benefits decades from now. A stock spiking upward helps that goal; only a shortfall against the target return genuinely threatens it. This is why Sortino is the more theoretically appropriate metric for pension fund evaluation. Notably, Korea's National Pension Service (NPS) uses the Sharpe ratio rather than Sortino, unlike most peer pension funds — a choice that offers easier cross-institution performance comparison globally, since Sharpe is the more universally used metric, but arguably reflects a more conservative institutional posture that doesn't fully align with a pension fund's actual risk profile.

GPFG, Norway's $1.7 trillion sovereign wealth fund, holds no domestic equities. Korea's National Pension Service just went the opposite direction — here's why that matters

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Why Home-Country Stocks Are Uniquely Risky for Pension Funds

Domestic equities carry a specific structural risk for any pension fund: they're an asset class where multiple bad outcomes tend to arrive simultaneously. If the domestic economy weakens, corporate earnings fall, stock prices decline, and the same weak economy typically brings job losses and lower wages — which directly reduces the pension contributions flowing into the fund. The diversification principle that makes portfolios resilient — one holding declining while another holds steady — breaks down specifically for home-country assets, since they tend to decline in tandem with the very economic conditions that also threaten the fund's incoming contribution revenue. This is analogous to an employee holding their entire retirement savings in their own employer's stock: if the company fails, both their salary and their retirement assets collapse together, at the worst possible moment.

How Norway and Canada Handle This Risk

This logic is why the largest global pension funds deliberately underweight or exclude domestic equities. Norway's sovereign wealth fund (GPFG), the world's largest, holds essentially no allocation to Norwegian domestic equities, investing almost entirely abroad. Canada's CPP maintains domestic asset exposure around just 12%, a stance it has maintained despite political pressure at times to invest more heavily in Canadian assets — earning it a reputation for prioritizing sound diversification principles over domestic political preference.

The NPS's Own Gradual Retreat from Domestic Equities

Korea's National Pension Service has historically followed the same trajectory. The fund held no domestic equities in its early years, operating primarily as a bond-focused fund, before first investing in domestic stocks in 1990. Domestic equity allocation gradually rose to a peak target of 18.0% in 2019, at which point the NPS, like other global pension funds, began recognizing the downside of concentrated home-country exposure and started reducing its target allocation every year:

2019	18.0%
2020	17.3%
2021	16.8%
2022	16.3%
2023	15.9%
2024	15.4%
2025	14.9%
2026 (original target)	14.4%

2026: The Target Gets Raised Instead of Rebalanced

By May 2026, the NPS's actual domestic equity holdings had risen to roughly 29.4%, more than double the 14.4% target — not because the fund was actively buying more Korean stocks, but because a sharp KOSPI rally inflated the value of its existing holdings relative to the rest of the portfolio. Under normal rebalancing discipline, exceeding a target this significantly would require selling a substantial volume of domestic stock to bring the allocation back in line.
Instead, the NPS raised its target rather than rebalancing down to it — lifting the target to 20.8%, and expanding its tactical asset allocation band from 3 percentage points to 6 percentage points, with an additional 2-point tactical allowance layered on top, allowing domestic equity exposure to reach as high as 28.8% without triggering a sell-down. The practical effect was maintaining a concentrated position in exactly the asset class carrying correlated risk with the fund's own contribution base, during a period of unusually high market volatility.

A Four-Year Disclosure Delay

The reasoning behind this decision isn't publicly available. The NPS's Fund Management Committee opted to keep meeting minutes confidential for four years, until 2030 — a marked departure from its standard practice of releasing minutes after one year. Separate freedom-of-information requests seeking to identify which committee members expressed which views, and on what basis they voted, were also denied in full.

Why This Matters for Korean Market Dynamics

As covered in our earlier piece on Korea's record run of circuit breaker events in 2026, the NPS's willingness or ability to buy during market stress has historically served as a stabilizing force for Korean equities. This expanded domestic equity band changes that dynamic somewhat: rather than being forced by rebalancing rules to trim an overweight position during a rally, the fund now has more room to hold — or add to — a larger domestic position through periods of elevated volatility, a shift whose long-term portfolio implications remain untested.

Bottom Line

Facing a domestic equity allocation more than double its target following a sharp 2026 KOSPI rally, Korea's National Pension Service chose to raise its target rather than rebalance down to it — a departure from the steady de-risking path it had followed since 2019, and from the home-bias discipline maintained by peer funds like Norway's GPFG and Canada's CPP. The reasoning behind the decision remains undisclosed, with meeting minutes withheld until 2030, four years longer than the fund's typical one-year disclosure practice.

This article is for informational purposes only and does not constitute investment, tax, or legal advice. Readers should consult a licensed professional before making investment decisions.