South Korea’s national pension fund posted a record 15% investment return last year, driven by gains in foreign equities, bonds, and alternative investments.
The National Pension Service (NPS), the world’s third-largest pension fund with over $800 billion in assets, said on Feb. 28 that it logged its highest-ever annual investment return last year at 15%. The fund held 1,213 trillion won ($830 billion) in total assets at the end of December. Total earnings stood at 160 trillion won.
“Last year’s investment return is the highest since the fund was established in 1988,” said an NPS official. “The fund’s average annual return is 6.82%.”
The fund’s strong performance was driven by high returns on overseas assets, including foreign equities, bonds, and alternative investments.
Foreign equities recorded the highest return at 34.32%, outperforming the 18.43% gain in the global equity market, based on the MSCI ACWI ex-Korea index during the same period. The NPS explained that gains in tech stocks and the U.S. Federal Reserve’s interest rate cuts contributed to the fund’s return on foreign equities. The Korean won depreciated against the dollar by 14.01% last year, which also boosted the return on foreign equities.
However, domestic equities underperformed with a return of -7% but still outperformed the benchmark KOSPI index’s -9.63% drop over the same period.
Returns on foreign and domestic bonds reached 17.14% and 5.27%, respectively. NPS said that foreign bonds delivered double-digit returns due to substantial interest income and the surge in the won-dollar exchange rate. Domestic bonds yielded a 5.27% return following the Bank of Korea’s two rate cuts in October and November.
Alternative investments yielded a return of 17.09%.
The fund has generated cumulative investment gains of 738 trillion won since it was founded in 1988, recording an average annual return of 6.82%. The National Pension Service Investment Management will finalize the investment performance for 2024 in June after conducting committee reviews.
