Ministry of Health and Welfare

NPS Posts 10.77% Return in 2021 on Solid Gains from Global Equities and Alternatives

-Despite the COVID-19 crisis, NPS delivered a double-digit annualized return of 10.57% and investment income of KRW 237 trillion over a three-year period-

□ The National Pension Service Investment Management (NPSIM), a dedicated fund management arm of the National Pension Service (NPS; CEO Yong-Jin Kim), announced on February 25, 2022 that the NPS had achieved a preliminary investment return of 10.77% for calendar year 2021 in the midst of challenging market conditions, including the spread of COVID-19 variants, inflationary pressures, interest rate hikes and supply chain disruptions.

○ Last year’s return was the second-highest in the NPSIM’s history, topped only by 11.31% recorded in 2019.

○ The investment income earned throughout the year, amounting to approximately KRW 91.2 trillion, was roughly equivalent to 3.1 times the benefits paid and 1.7 times the contributions received over the same period.
* In 2021, the investment income (KRW 91.2 trillion) was worth nearly 3.1 times the benefits paid (KRW 29.1 trillion), 1.7 times the contributions received (KRW 53.5 trillion) and 2.61 times the trade surplus (KRW 35 trillion).
** The investment income was greater than the combined annual operating incomes (KRW 84.4 trillion) of the top 10 companies by market capitalization on the KOSPI as of the end of 2021.

□ For the three years ended December 31, 2021, the NPS has demonstrated a stable performance in the wake of the COVID-19 pandemic, with an annualized average return of 10.57% and investment income of approximately KRW 237 trillion.

<Investment Performance>

* The total investment income (KRW 236.7 trillion) over a three-year period ended Dec. 31, 2021 represented about 45% of the total cumulative income (KRW 530.8 trillion) and was equivalent to about 89% of the total cumulative expenses (KRW 264.7 trillion).

○ Since its inception of the National Pension Fund in 1988, the NPS has achieved a cumulative annualized return of 6.76% or KRW 530.8 trillion as of the end of 2021.

□ The best-performing asset class in 2021 was global equities with a 29.48% return, followed by alternatives at 23.80%, global fixed income at 7.09% and domestic equities at 6.73%. Domestic fixed income portfolio posted a–1.30% return.
* The returns above are calculated using a money-weighted rate of return.

○ Domestic and global equities delivered a solid performance, driven by a spike in stock prices thanks to improved economic indicators and robust corporate earnings. Notably, global equities offered high returns on the back of the swift economic recovery in most advanced economies and strong trends in tech and healthcare sectors amid the prolonged pandemic. In addition, foreign currency translation effects from a strong U.S. dollar played a part in the gains.
* Domestic Stock Market (KOSPI): up 3.63%
* Global Stock Market (MSCI ACWI ex-Korea, USD): up 19.38%
* KRW/USD exchange rate: up 8.96%


○ Global fixed income also contributed to last year’s double-digit return, supported by a rise in the won-dollar exchange rate, whereas domestic fixed income yields fell due to increased loss on bond valuations from climbing interest rates.
* Korea Treasury (3-year): up 82.5bp
* U.S. Treasury (10-year): up 59.7bp

○ Alternative investments performed relatively well, backed by soaring values of assets propelled by stable economic growth and booming global stock markets. The main drivers of the positive outcomes included an increase in valuation gain on private equity assets at home and abroad, gains from sales of domestic real estates, and favorable exchange rate movements.

□ As part of efforts to enhance long-term profitability and stability of the Fund, the NPS has diversified its investment portfolio by reducing the allocation to domestic fixed income and raising the allocations to global and alternative assets.

○ The allocation to domestic fixed income decreased from 59.8% at 2012 end to 35.8% at 2021 end, whereas the weights of global and alternative investments jumped from 13.2% to 43.8% and from 8.4% to 12.6%, respectively, during the same period.

□ The result of the performance assessment on fund management for the year 2021 will be finalized by the National Pension Fund Management Committee around at the end of June, following reviews by the Special Committee on Risk Management and Performance Evaluation & Compensation, etc.

<Appendix> National Pension Fund Status as of the end of 2021