Teachers' Pension posts record-high 12% return in 2021

Korea Teachers’ Pension (KTP) has said the rate of return from its investment management in 2021 reached 12%, the highest ever since its inception in 1974. The return amounted to 2.4 trillion won ($2.1 billion), also a record high. The record-breaking return was thanks to overseas bull stock markets and the increased value of alternative assets, the South Korean retirement fund for private school teachers and employees said on Feb. 4. 

Overseas alternative assets and overseas equities respectively achieved 34.3% and 27.1% returns. The overseas investments were mainly in the US and other developed countries, the pension fund said. Domestic alternative assets and overseas bonds earned 15.8% and 7.9% returns, respectively.

Domestic equities posted a 5.7% return, which surpassed the benchmark. Domestic bonds had a negative 1.2% return due to the interest rate hike aftermath. The pension fund gained a 4.1% return from direct investments in domestic equities, lower than indirect investments through asset management firms.

The pension fund’s assets under management reached 23.5 trillion won ($19.6 billion) as of end-2021, up 2.6 trillion up from 20.9 trillion won as of end-2020. The yearly rate of return has been over 11% for the past three years in a row.

“Our fund was estimated to dry up in 2049, according to the financial research in 2020. However, this has been delayed for three years to 2052 thanks to double-digit rates of return for three straight years,” an official from Teachers’ Pension said. The retirement fund will expand overseas and alternative investments, the official added.

Its total assets amounted to 26.7 trillion won at end-2021, 2.8 trillion from end-2020. The AUM make up 88.1% of the total assets. Equities account for 42.5%, or 10 trillion won, while bonds make up 34.8% or 8.2 trillion won. Alternative assets represent 21.3% or 5 trillion won. Cashable assets take up 1.5% or 348.8 billion won.

Regarding overseas alternative assets, the CIO said the US will account for 60% of the pension fund's new overseas alternative investments. "There will be plenty of investment opportunities in the infrastructure and real estate sectors in the US and other developed countries," he said in an interview with The Korea Economic Daily last November.

It is aiming to increase the overseas alternative asset proportion to 21% of its AUM by end-2025, Lee said at the time.

Write to Jae-fu Kim at hu@hankyung.com
Jihyun Kim edited this article.