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Korean pension giant NPS swings to record return on equity gains

NPS
By Hui Ching-hoo   
March 1, 2024

Korea’s National Pension Service (NPS) reported a record 13.59% investment return in 2023 driven by equity gains, and is moving to benchmark itself against global peers for greater flexibility in asset allocation.

Last year’s return was a turnaround from 2022, when the world’s third largest pension fund suffered its worst ever performance with an 8.22% investment loss as major central banks started hiking interest rates to rein in soaring inflation, battering financial markets.

The NPS earned 126.8 trillion won (US$94.9 billion) in investment gains last year compared with a 79.6 trillion won loss in 2022, the Ministry of Health and Wealth, which supervises the pension fund, says in a statement on February 28.

The gains were driven by both foreign and Korean stocks. Foreign stocks in the pension fund’s investment portfolio returned 23.89% while domestic stocks returned 22.12%.

Returns on investments from foreign and domestic bonds were 8.84% and 7.4%, respectively.

The pension fund’s annualised investment return since it was established in 1988 was 5.92%

Meanwhile, the health and wealth ministry says the NPS plans to bolster flexibility in its mid- to long-term asset allocation this year by benchmarking itself against international counterparts like the California Public Employees’ Retirement System and the Canada Pension Plan Investment Board.

“NPS will also revise its guidelines to introduce a new system for asset allocation,” the ministry says. It didn’t provide any details.

Jeonju-based NPS had 1,035.8 trillion won of net assets at the end of 2023.