Korea’s pension fund delivers 6.35% return in Q1 on strong stocks

South Korea’s National Pension Service (NPS) headquarters [Courtesy of NPS]

South Korea’s National Pension Service (NPS), the country’s operator of pension funds that saw up to 80 trillion won ($60.6 billion) in valuation losses last year, managed to make up for the losses by achieving a return of over 6 percent in the first quarter.

The NPS Investment Management said on Tuesday that it achieved a 6.35 percent return on its assets in the first quarter. By asset, it posted the highest 12.42 percent return on Korean stocks, followed by overseas stocks at 9.7 percent, foreign bonds at 5.38 percent, alternative investments at 3.49 percent, and domestic bonds at 3.25 percent.

The NPS sees that domestic and overseas stocks delivered a relatively high return as expectations grew that the interest rate hikes in the U.S. will slow.

Last year, the NPS delivered the lowest return ever at negative 8.22 percent, logging a loss of 79.6 trillion won. As a result, its year-end reserves fell to 890.5 trillion won.

This year, however, the national pension fund posted an investment profit of 58.4 trillion won in the first quarter, driving up the fund’s total value to 953.2 trillion won at the end of the first quarter.

“Expectations for an easing of monetary tightening have boosted the market as inflation and interest rate hikes by the U.S. Federal Reserve slow,” said an unnamed official from the NPS Investment Management.

“Cumulative gains since the fund’s launch have also increased to 509.7 trillion won.”

Domestic stocks and overseas stocks, for example, outperformed the benchmark by 0.05 percentage points and 0.57 percentage points, respectively.

“We recorded a fairly good rate of return amid global economic uncertainties such as monetary tightening and concerns over economic slowdowns in major countries,” said Kim Tae-hyun, chief executive officer of NPS. “We will strive to improve our return by responding to increased market volatility and continuing to diversify our investments.”

The NPS is likely to have recovered most of last year’s losses as major indices at home and abroad have risen further in the second quarter. The benchmark Kospi gained more than 4 percent from the end of March, hitting the 2,500 mark in the second quarter. The U.S. S&P 500 index also rose by more than 2 percent during the same period.