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NPF posted KRW 440tn in cumulative return until 2020

  • Date : 2021-02-25
  • Hit : 783

NPF posted KRW 440tn in cumulative return until 2020


NPS generated 9.7% and KRW 72 trillion in investment return in 2020 amid the global pandemic.

□ The National Pension Service Investment Management (NPSIM), a fund management organization of the National Pension Service (NPS) led by CEO Yong-Jin Kim announced on February 25, 2021 that the National Pension Fund (NPF) has reached KRW 833.7 trillion as of the end of 2020, an increase of KRW 97.1 trillion from the end of the previous year.

○ The NPS has posted an annualized rate of return of 6.27% (preliminary) and a cumulative investment income of KRW 439.6 trillion since the inception of the fund in 1988.

○ In particular, the NPS has generated an annual return of 9.70% (preliminary) and KRW 72.1 trillion for the past year amid uncertainty in global economy due to the COVID-19 pandemic fallout, doubling the annual operating profit of the largest South Korean company by market capitalization.

※ The largest South Korean company by market capitalization - Samsung Electronics Co. - generated KRW 36 trillion in operating profit in 2020.

□ The NPS recorded a whopping 9.72% in money-weighted rate of return for financial investments, a sector fully invested into financial assets. For the total fund as a whole, the NPS also resulted in a good performance outcome of generating excess returns relative to each benchmark in Domestic Equity, Global Equity, Domestic Fixed Income and Global Fixed Income.

<Financial Investments Breakdown>
(Money-weighted)

Type

Total

Domestic Equity

Global Equity

Domestic

Fixed- Income

Global

Fixed- Income

Alternatives

Return (%)

9.72

34.89

10.76

1.74

-1.61

2.38

Asset Value

(KRW in tn)

833.1

176.7

192.8

326.1

44.9

90.7

Weight (%)

100

21.2

23.1

39.1

5.4

10.9

Note. The total financial investments include short-term assets.

○ Most of all, the tactical asset allocation adjusting by the NPSIM amid a huge decline in local and overseas stock markets in the aftermath of the pandemic announcement has increased the return for the entire portfolios. The improved return was also led by a brighter outlook for economic rebound in the second half of the year led by major economies that introduced large-scale fiscal stimulus packages and monetary easing policies.

* Korean stock market (KOSPI): up by 30.75%
* Global stock market (MSCI ACWI ex-Korea in USD): up by 15.84%

○ The fixed-income investments performed well not only due to the effect of securities selection, but also the rise in valuations based on the low rate trend globally.

* Korean treasury (3-year): down by 38.5 bps
* U.S. treasury (10-year): down by 100.4 bps

○ The overseas investments, however, recorded a lower rate of return denominated in KRW than the one in USD because of the foreign exchange loss from the fall in the USD/KRW exchange rate.

* The USD/KRW exchange rate: down by 6.0%

<Investment Return by Asset Class>
(Time-weighted, Unit: %, %pt)

Asset Class

Return (KRW)

Excess (BM)

Return (USD)

Excess (BM)

Domestic Equity

34.66

1.21

-

-

Global

Equity

10.22

1.41

17.31

1.47

Domestic Fixed- Income

1.71

0.13

-

-

Global

Fixed- Income

0.19

0.72

6.59

0.70


□ On alternative investments, there were new investment commitments of approximately KRW 23 trillion in only overseas markets, even though the deal sourcing activities were severely hampered due to the COVID-19 induced travel restrictions across borders.

○ The new commitments came as the NPS made efforts to scale up investment and explore new opportunities through co-investment and more enhanced strategic partnership with leading institutional investors such as Dutch pension fund APG and Allianz with its continued emphasis on investment diversification by strategy and region.

○ Even though the return on global alternative investments was lower than the year-ago level after the foreign exchange loss was reflected, the alternative investments has contributed to the entire portfolio’s performance with a stable stream of interest and dividend income and valuation gains.

□ The final performance evaluation of the National Pension Fund will be approved on late June by the highest decision-making body Fund Management Committee upon review of Special Committee on Risk Management and Performance Evaluation & Compensation.

<Appendix> Overview of National Pension Fund as of the End of 2020


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