Why Are South Koreans' Funds Flowing to the U.S. from 'Western Learning Ants' to Korean Pensions?

Author: Zen, PANews

On July 25, during an event called "Silicon Valley Venture Capital Meeting" hosted by South Korean President Lee Jae-myung, the National Pension Service (NPS) of South Korea signed a memorandum of cooperation with six leading U.S. venture capital firms.

On the other side of the negotiation table were Sequoia Capital, a16z, Khosla Ventures, Lightspeed Venture Partners, General Catalyst, and NEA. These six firms collectively manage approximately $313 billion in assets, with investment histories that include well-known tech giants such as Apple, NVIDIA, Google, OpenAI, and Anduril.

According to the memorandum of cooperation, both parties plan to establish long-term cooperation channels, explore global venture capital opportunities, and share market and project information. The South Korean government set the stage for this meeting, while the real player with the financial ledger was the National Pension Service, managing assets close to 1,690 trillion won (approximately $1.16 trillion).

In South Korea, individual investors known as "Western Learning Ants" have long been accustomed to opening brokerage software late at night, waiting for the New York market to open. Data from the Korea Securities Depository shows that as of June 2, 2026, the market value of U.S. stocks held by domestic investors through local brokers reached approximately $206.3 billion, setting a historical high. After entering July, the inflow of funds accelerated again, with a cumulative net purchase of U.S. stocks of about $2.596 billion from July 1 to 24, already reaching about four times that of the entire month of June.

One entity bears the responsibility of national pensions, while the other seeks personal wealth growth. The investment horizons, risk tolerance, and institutional constraints of these two types of funds differ significantly, yet they increasingly cross the Pacific.

"Western Learning Ants" at Midnight and Pensions That Local Markets Cannot Fully Support

The enthusiasm of South Korean retail investors for U.S. stocks has persisted for years. In the investment context of South Korea, individual investors who remain in the domestic stock market are referred to as "Eastern Learning Ants," while those who venture into overseas markets are called "Western Learning Ants."

There is a time difference between the U.S. stock market and Seoul, with normal trading hours coinciding with late-night hours in Korea, but this is not an issue for night-owl Koreans. Additionally, with local brokers providing foreign currency exchange, fractional share trading, and extended hours services, buying U.S. stocks is not much different from purchasing Korean stocks.

This trend encompasses two factors. Part of the funds is engaged in normal global allocation. The South Korean economy boasts strong industries such as semiconductors, automobiles, batteries, and shipbuilding, but the structure of listed companies is relatively concentrated; the other part carries a stronger speculative nature. South Korean retail investors have long favored thematic stocks, leveraged products, and high-volatility assets. They quickly concentrate their investments during uptrends, but are also prone to panic selling when market conditions reverse.

Recently, South Korean regulatory authorities tightened the entry requirements for single-stock leveraged ETFs to control market volatility caused by the high concentration of personal funds.

The NPS's move overseas is driven by a different logic.

The South Korean National Pension System was launched in 1988 and is akin to a nationwide public pension insurance scheme. Starting from July 2026, corporate employees will contribute 9.5% of their assessed monthly income to pension insurance, with both employers and employees each bearing 4.75%; individual contributors typically bear the entire cost themselves. After paying current pensions, the surplus funds are invested by the NPS in stocks, bonds, real estate, infrastructure, and private equity funds.

As of the end of April 2026, the assets of the National Pension Service reached 1,670.7 trillion won. Since the establishment of the system, it has accumulated 945.5 trillion won in income from insurance premiums and other sources, with total investment returns reaching 1,177.9 trillion won; expenditures for pension payments and management have totaled 452.8 trillion won.

One noteworthy point is that the funds earned from NPS investments over the years have already exceeded the total insurance premiums received. This has allowed it to transcend its role as merely an administrative body responsible for "collecting premiums and disbursing pensions."

In 2025, South Korea completed its first major reform of the National Pension in 18 years, gradually increasing the contribution rate from the original 9% to 13%, while also adjusting the pension replacement rate. This reform has delayed the projected exhaustion of the fund, but the pressure on income and expenditure due to the aging population in South Korea continues to rise. In the future, investment returns will become a crucial variable in extending the fund's lifespan.

Meanwhile, the scale of the NPS has grown to a point where it can no longer be concentrated solely within South Korea.

As of the end of April 2026, the NPS had 930.7 trillion won allocated overseas, accounting for 55.7% of its financial assets. This includes 604.5 trillion won in overseas stocks, 103.1 trillion won in overseas bonds, and approximately 221.4 trillion won in alternative overseas assets. The proportion of domestic investments stands at 44.3%.

If such a massive amount of funds were to remain primarily in South Korea, the NPS would continuously increase its holdings in large companies like Samsung Electronics and SK Hynix, significantly impacting market prices during transactions. The concentration of industries in the South Korean stock market is high, and if pensions, employment, household income, and investment portfolios all rely on the domestic economy, the risks would also compound.

Thus, expanding overseas investments serves a dual purpose: on one hand, to seek richer sources of returns, and on the other, to reduce the constraints of local market capacity and single economic cycles. Reuters has estimated the NPS's asset scale to be equivalent to about 60% of South Korea's GDP, a scale that necessitates global fund allocation.

From the New York Public Market to the Silicon Valley Private Equity Circle

The NPS's entry into Silicon Valley is not a sudden shift.

In 2002, the NPS began entrusting external institutions to manage overseas stocks; in 2005, it entered global alternative investments; in 2011, it established an office in New York, followed by offices in London and Singapore. In 2024, the NPS opened an office in San Francisco, extending its reach into the region most concentrated with U.S. tech startups and venture capital.

Today, over half of the NPS's financial assets are managed by external institutions. While pensions can directly purchase publicly traded stocks and bonds, entering private equity, venture capital, real estate, and infrastructure sectors relies more on the project sourcing, due diligence capabilities, and local networks of professional managers.

The U.S. occupies an important position in this global allocation. The latest 13F filing submitted by the NPS to the U.S. Securities and Exchange Commission shows that as of the end of March 2026, its disclosed holdings in U.S. listed securities were valued at approximately $131.7 billion, involving 562 assets. The 13F only covers U.S. listed securities that meet reporting requirements and cannot represent the NPS's entire investment in the U.S., but it is sufficient to demonstrate its scale on Wall Street.

Signing agreements with top VCs like Sequoia and a16z further advances this route into the Silicon Valley venture capital ecosystem.

Large tech companies in the public market have already entered a mature stage, while early-stage projects in artificial intelligence, robotics, biotechnology, and defense technology are primarily controlled by VCs. Building a team to search, evaluate, and manage these startups individually is costly and lacks local networks. Establishing fixed cooperation channels with leading VCs can help the NPS access fund shares, growth-stage projects, and market information.

For the six VCs, the NPS is equally attractive. Venture capital firms need to continuously raise new funds, and public pension funds, with their large scale and long duration, are an important source of institutional LPs. Especially against the backdrop of expanding financing rounds in AI infrastructure, robotics, and deep technology, the value of long-term capital becomes even more prominent.

However, this MOU currently remains a roadmap for cooperation. The officially disclosed content mainly focuses on exploring global investment opportunities, information exchange, and long-term cooperation, without specific fund commitments or evidence that the NPS has concentrated large amounts of funds with the six institutions. The NPS emphasized in its announcement that it will assess investment opportunities, market conditions, and risk factors before gradually expanding its overseas venture capital investments.

Additionally, the South Korean government hopes this channel can also serve domestic startups. Information released by the presidential office mentioned that both parties also discussed investments in Korean startups and entry into global markets, with a16z already establishing an office in South Korea. For the NPS, investment returns and the safety of pension funds remain the primary metrics. At the same time, helping Korean companies connect with Silicon Valley may also lead to industrial spillover.

The Same Dollar Direction, Two Different Risks

Both South Korean retail investors and the NPS are expanding overseas investments, yet they are engaging in entirely different transactions.

Retail investors can concentrate their funds in a few tech stocks or use leverage to chase short-term trends. The NPS, on the other hand, needs to manage stocks, bonds, real estate, infrastructure, and private assets simultaneously, with investment horizons spanning decades. Individual investment losses are borne by families, while significant errors in pension investments can affect the entire society's pension expectations.

Their true commonality lies in their understanding of the boundaries of the South Korean domestic market.

Ordinary investors seek growth opportunities in U.S. tech companies; the NPS, however, must find sufficiently numerous and diversified assets for a fund exceeding 1,600 trillion won. When the South Korean economy cannot provide exposure to all industries and market capacity, funds naturally extend to global markets, with the U.S. becoming one of the most important destinations.

This choice is also beginning to have macroeconomic impacts.

Purchasing overseas assets requires currency exchange into dollars. The continuous buying of U.S. stocks by South Korean retail investors and the NPS's increasing overseas allocations both create demand for dollars. At the beginning of 2026, the retail investors' buying spree of U.S. stocks was seen as one of the important internal factors putting pressure on the won; the NPS's foreign exchange operations are on a larger scale, with single adjustments potentially affecting market supply and demand.

To mitigate the impact of the NPS's concentrated dollar purchases in the spot market, the Bank of Korea and the NPS have extended their foreign exchange swap arrangements until the end of 2026. The NPS can obtain dollars for overseas investments through the central bank's foreign exchange reserves, reducing the need to directly sell won; during rapid depreciation of the won, the NPS also engages in strategic foreign exchange hedging.

Thus, South Korean policy faces a long-standing balancing act: pensions require global diversification and higher returns, while stable exchange rates and domestic capital markets hope for funds to remain moderately within the country.

In May 2026, the NPS raised its target domestic stock ratio for the end of the year to 20.8%, while also setting the overseas stock target for the end of 2027 at 35.6%. This adjustment considers both the rise of the South Korean stock market and responds to the pressure that overseas investments place on the won, indicating that the NPS's globalization path will continue to be calibrated with market conditions.

Therefore, the NPS's entry into Silicon Valley does not mean that the South Korean government is beginning to gamble the national pension on high-risk tech ventures. Rather, it is an extension of its more than twenty years of global allocation: the fund's scale continues to grow, the domestic market capacity is limited, and the demographic structure requires it to seek higher and more diversified long-term returns. In this regard, pension systems in countries like the Netherlands and Switzerland have taken the lead.

What is truly noteworthy is that the wealth structure of South Korean residents is undergoing a change. Work, real estate, and pension responsibilities remain rooted in South Korea, but an increasing amount of financial assets are seeking growth in the U.S. and global markets. The MOU signed between the NPS and the six Silicon Valley VCs is just the latest milestone in this process.

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