NPS posts 24% return from alternative investment in 2021

National Pension Service (NPS) of South Korea posted a 10.86% rate of return in 2021, according to a preliminary data report by its investment management arm on Feb. 25. Following an 11.3% return in 2019, the 2021 record is the second-highest return since the investment arm’s inception in 1999. The average rate of return for the past three years, between 2019 and 2021, reaches 10.59%.

The world's third-largest pension fund investment arm achieved a 91.2 trillion won ($75.6 billion) return last year, the report said. The return is 1.7 times the NPS’ earnings from the national insurance scheme of the last year, 53.5 trillion won, and 3.1 times the pension payment in 2021, 29.1 trillion won. The pension fund’s asset under management increased to 948.7 trillion won ($786.3 billion won), 115 trillion won up from 2020. The AUM has surged by 70% since 2016.

By asset classes, the pension fund’s overseas equities achieved a 29.77% return, and alternative investment posted a 23.97% return. Gain on valuation of private equities and bonds and exits from some domestic real estate assets bolstered the return from alternative investment, NPS stated. The pension fund's return from alternative investment in 2020 was 2.57%, and the average return from the asset class for the past three years was 11.78%.

Overseas bonds, domestic equities and domestic bonds had 7.26%, 5.88% and negative 1.25% returns, respectively. NPS said expectations on economic recovery boosted stock prices, which resulted in high returns from equities. Fast economic recovery in developed countries, stronger dollar and stock rally in global information technology and medical sectors further backed the returns from overseas equities, the report stated.

Domestic bonds had the highest proportion of the AUM, 35.8%. Overseas equities, domestic equities, alternative investment respectively made up 27.1%, 17.5% and 12.6%. Overseas bonds accounted for 6.7%.

The preliminary data will be finally approved by the end-June of this year after being reviewed by the NPS committees for risk management and performance rewards.

Write to Jong-woo Kim at jongwoo@hankyung.com
Jihyun Kim edited this article.