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NPS posted 4.17% return at end of Q3 2020 with stock rebound in hope of recovery

  • Date : 2020-11-27
  • Hit : 2367

NPS posted 4.17% return at end of Q3 2020 with stock rebound in hope of recovery

□ 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 November 27, 2020 that the National Pension Fund (NPF) has reached a KRW 785.4 trillion as of the end of September 2020, an increase of KRW 48.8 trillion from the end of the previous year.

○ The NPSIM added that the NPF has achieved a positive return through the stable investment in the face of unstable global economic landscape due to the COVID-19 pandemic with a preliminary return of 4.17% over the last nine months.

□ The global economy had remained highly uncertain with the crash in domestic and global stock markets due to the COVID-19 led recession and concerns that corporate earnings would be hit by containment measures to stop the virus. Even the abrupt fall in oil prices in fear of weaker demand accelerated volatility in financial markets.

○ However, the large-scale stimulus measures and monetary easing policies taken by leading economies since the onset of the COVID-19 heightened the expectation of economic recovery and let domestic and global stocks rebound in the third quarter.

○ The NPF has generated an annualized rate of return of 4.17% as of the third quarter of this year, with an annualized average rate of return since the inception of 5.69%.

□ By asset class, the NPF returned 8.47% in domestic equity, 3.28% in global equity, 2.69% in domestic fixed income, 6.01% in global fixed income, 3.94% in alternative investments.

○ As for domestic and global equity investments, the return has increased largely driven by optimism over the economic recovery from vaccine development and outlook for improved corporate earnings and heightened hope for new stimulus packages prior to the U.S. election. The year-on-year increase in the USD/KRW exchange rate also laid a positive impact on the performance of global equity investments.

* Korean stock market (KOSPI): up 5.93%
* Global stock market (MSCI ACWI ex-Korea, USD): up 1.10%

○ As for domestic and global fixed income investments, the bond yield has fallen as more liquidity were delivered to the market by central banks cutting interest and taking monetary easing policies in form of purchasing government bonds and governments spending more to stimulate their economy. As a result, the valuations of fixed income in portfolios increased, while global fixed income, especially, saw an improvement of return with the increase in the USD/KRW exchange rate.

* Korean Treasuries (3-year): down 51.3bp
* U.S. Treasuries (10-year): down 123.4bp

○ As for alternative investments, meanwhile, the mid-year return is mostly influenced by interest and dividend income, while foreign assets reflect foreign currency translation gains and loss from changes in the USD/KRW exchange rate. Fair value of alternative assets are measured at year-end once a year.

<Appendix> Overview of National Pension Fund as of the Third Quarter of 2020

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