Korea’s pension fund delivers 9.09% return in H1 on high profit from stocks

[Photo by Lee Seung-hwan]

South Korea’s National Pension Service (NPS), the country’s largest institutional investor, delivered a return of over 9 percent in the first half of this year, managing to recover the nearly 80 trillion won ($60 billion) in losses it incurred last year.

The NPS Investment Management said on Tuesday that it achieved 9.09 percent return on its assets in the first six months of this year. Total profit reached 83.98 trillion won, resulting in an additional gain of 4.42 trillion won after recovering from last year’s loss of 79.55 trillion won.

By asset, the NPS delivered the highest 17.24 percent return on overseas stocks, followed by domestic stocks at 17.12 percent, alternative investments at 5.01 percent, and domestic bonds at 2.72 percent.

Domestic stocks delivered higher profit than overseas stocks until May but overseas stocks began to deliver higher profit in just one month.

“Despite concerns about global banking crises and economic downturns, both stocks and bonds remained strong driven by eased inflation and a softening stance on interest rate hikes, resulting in a favorable rate of return,” the NPS said.

The pension fund stated that domestic and overseas stocks achieved strong performance due to eased concerns about tightening by the U.S. Federal Reserve and robust corporate performance.

NPS Chairman Kim Tae-hyun noted that there were challenges in management due to the economic conditions and weak investment environment but it managed to make up for last year’s losses and deliver additional gains.

“We will do our best to boost long-term profitability by establishing a diversified portfolio and securing new investment opportunities,” Kim said.

Domestic and overseas bonds were influenced by expectations of inflation and eased tightening measures, resulting in limited interest rate declines leading to the return.

The return on alternative investments primarily reflected interest and dividend gains, as well as foreign exchange gains following fluctuations in the exchange rate between the Korean won and the U.S. dollar.

NPS conducts fair value evaluations once at the end of a year, and the fair value assessment is not reflected in the year-round rate of return.

The NPS return rate this year is fairly solid even when compared to major overseas pension funds.

The U.S. California Public Employees’ Retirement System, for example, delivered 3.3 percent return in the first quarter.

NPS’s cumulative operating revenue, in the meantime, has increased to 535.26 trillion won since its inception, with the fund’s assessed value reaching 983.56 trillion won.