South Korea’s National Pension Service’s (NPS) investment income grew by 72.1 trillion won (US$64.2 billion), or 9.7%, in 2020 as the outlook for the global economy brightened after stimulus measures in major countries helped to lift stock markets.
The income gain, which was lower than the 11.31% in 2019, drove the pension giant’s total assets under management to 833.1 trillion won as of December 2020 from 736.7 trillion won a year earlier.
The Ministry of Health and Welfare attributes the gain to “a brighter outlook for economic rebound in the second half of the year and the large-scale fiscal stimulus packages and monetary easing policies”, to address fallout from the coronavirus pandemic.
“NPS’s investment board adjusted the fund’s tactical asset allocation amid a huge decline in local and overseas stock markets triggered by the coronavirus crisis,” it says in a statement on February 25.
The ministry supervises the NPS, the world’s third largest pension fund.
The fund earned a return of 34.89% from domestic equities last year, the highest of all its investments, as the benchmark Korea Composite Stock Price Index jumped 30.75%.
The return from foreign equity investments was 10.76%.
Bond returns were lacklustre. The pension fund’s investment in domestic fixed income returned 1.74%, and it incurred a 1.61% loss on foreign bonds.
The return on its global alternative investments dropped to 2.38% from 9.62% in 2019. According to the ministry, these investments “have contributed to the entire portfolio’s performance with a stable stream of interest and dividend income and valuation gains”.
The NPS invested 23 trillion won in foreign alternative assets in 2020.
The ministry says the pension fund’s overseas investments were hit by foreign exchange losses as the Korean currency strengthened against the greenback. The Korean won appreciated 6% against the US dollar last year.
All of the NPS’s assets outperformed their benchmarks in 2020, according to the ministry.