The Nasdaq 2025 Asset Owner Roundtable Series - Korea

Adapting portfolios to shifting markets

Many of Korea’s leading asset owners are rethinking how they manage liquidity, risk and asset exposure in response to uncertainties over US trade policy, sticky inflation, high levels of fiscal debt and elevated geopolitical risk.

Among various approaches to consider is a more flexible, cross-asset class framework for asset allocation, along with customised exchange-traded solutions to enhance liquidity, flexibility and cost-effectiveness, plus greater access to alternative assets such as private equity, private credit and infrastructure.

These were some of the key takeaways from a recent roundtable in Seoul – the inaugural “Nasdaq 2025 Asset Owner Roundtable Series: Korea” – involving senior investment executives from influential pension funds, government entities, benefit associations and insurers.

The discussion reinforced the need to navigate today’s investment environment with more than just tactical shifts – rather with structural evolution. From embracing data-driven customisation to experimenting with new allocation frameworks and private market innovation, Korean asset owners are demonstrating both caution and creativity in equal measure.

New York-based Craig Feldman, who heads the Asset Owner, Consultant and Institutional Index Strategy within Nasdaq’s Index Product Management team, led the conversation on key topics:

• Rethinking asset allocation and portfolio management approaches in dynamic markets
• Growing adoption of customization and exchange-traded products to gain efficient asset class exposures
• Making alternatives and private markets a bigger part of the investment decision-making process

Five key themes to emerge from the discussion:

1. Gradual TPA adoption: Most institutions are not moving entirely away from SAA but are integrating TPA elements incrementally, testing the approach with select portfolios while evaluating its operational and performance implications.
2. Customised solutions: Increasingly, investors are seeking bespoke strategies that align with specific mandates, risk profiles and thematic exposures. Custom indexes and active ETFs play a central role in this trend.
3. ETF utilisation: ETFs are becoming central tools for both domestic and international allocations, offering liquidity, diversification and the ability to implement tactical adjustments efficiently.
4. Operational preparedness: Transitioning to TPA or incorporating sophisticated ETFs requires robust operational infrastructure, governance and risk management capabilities. Institutions must balance the benefits of innovation with the practical realities of implementation.
5. Focus on performance drivers: Isolating the impact of TPA or customised strategies on performance remains challenging. Investors need careful analysis to distinguish between the effects of portfolio structure versus specific asset selection or market timing.

Adapting to changing times

Trade disruption and heightened geopolitical uncertainty are driving an increasing number of asset owners around the world to rethink how they make portfolio decisions and investment allocations.

The shift – in line with an ever-sharper focus on diversification, to get greater resilience across asset class exposures – is from the traditional Strategic Asset Allocation (SAA) model towards a more dynamic, holistic framework known as a Total Portfolio Approach (TPA).

In short, Feldman describes this investment philosophy and process as treating the entire portfolio as a single unit geared towards a clear goal. Decisions are based on overall portfolio contribution to objectives rather than category-specific benchmarks, he explained.

Making this organisational and cultural change is already underway within some Korean asset owners.

It is easier said than done, participants revealed, given that a TPA challenges institutions to think across silos to ensure each dollar of capital for both public and private markets assets is generating the optimal risk-adjusted return for the entire portfolio.

For the time being in Korea, perhaps a hybrid approach could be an effective way forward, agreed some of the participants. This would retain some SAA elements while introducing TPA-like flexibility as a practical, near-term solution.

Customising solutions

Another consideration for Korea asset owners is making more use of exchange-traded products (ETPs) as they increasingly offer more liquidity, flexibility and cost-effectiveness.

These products have matured far beyond their passive index-tracking roots, now providing specific exposure to factor-based, thematic and even semi-active strategies, as well as liquid access to alternative assets.

Further, customised indices can enable institutions to control methodology, asset inclusion and sector exposure – in turn allowing them to align portfolios more closely with strategic objectives, manage risk more efficiently and respond to unique cash flow requirements or regulatory constraints.

Considered as the next frontier, Feldman said asset owners across global markets increasingly want tailored index solutions that align with their strategic goals and constraints.

This is also true for some Korean insurers. Participants highlighted the value of these instruments as cost-efficient building blocks for their portfolio, especially given that some of the ETFs in the market rival active funds in sophistication, allowing for more targeted exposures.

The consensus among participants was that ETFs are enabling greater flexibility and liquidity management. Further, as regulatory capital frameworks tighten, ETPs can help institutions manage solvency and duration risk more efficiently.

Private markets taking centre stage

With alternative assets already a cornerstone of most institutional portfolios in Korea, there is a global trend involving democratisation of private markets.

As global bond yields fluctuate and traditional equities become more concentrated, the aim is to make private equity, private credit and infrastructure more accessible through listed or semi-liquid vehicles, for diversification and return enhancement.

This is a welcome development for various participants, who raised concerns about inflated valuations and the need to reassess regional concentration risks and the sustainability of heavy US exposure.

However, benchmarking challenges persist, particularly around fair valuation and performance measurement.

For some Korean asset owners, there is interest in semi-liquid “evergreen” vehicles to get exposure to private markets with periodic liquidity windows.

Adaptability, collaboration and innovation

Across all sectors and assets, managing duration and liquidity remains a priority. Korean asset owners want to maintain consistent cash flows amid inverted yield curves and volatile bond markets.

As a result, tactical use of long-duration sovereign bonds, investment-grade private placements and structured products, for example, can help balance returns with regulatory requirements. Currency management, particularly for unhedged offshore exposures, is another focal area, with some institutions using systematic hedging while others diversify natural offsets.

Meanwhile, as part of adapting approaches to portfolio management and exposure, participants acknowledged technology as a critical enabler of both TPA implementation and ETF customisation.

Advanced analytics, simulation tools and AI-driven insights are needed to help institutions model total portfolio risk and optimise allocations efficiently, explained asset owners.

Ultimately, as global uncertainty persists, institutions that can adapt their governance, technology and portfolio frameworks to be more agile will be better positioned to capture opportunity amid volatility.