NPS posts near 10% IRR as of end-Aug, riding exit market boom

The National Pension Service (NPS) has achieved an average 9.65% return on investments as of the end of August, driven by overseas equity divestments and inflated valuation gains of global bonds owing to the weaker won. 

The South Korean pension fund said on Friday that overseas equities delivered an internal rate of return of 24.87% as of end-August, followed by domestic equities with 12.29% and alternatives with 8.46%.

"Taking advantage of the booming IPO and exit markets this year, we actively divested (equities investments). We also actively invested in growth equities, venture companies and the tech sector, using various strategies such as continuation funds and GP-led transactions," said Choe Hyung Don, NPS' head of the private equity and venture capital investment, during ASK 2021 on Wednesday. 

"This year, our divestments may be greater than the amount of our new investments," he added, citing record levels of valuations, a looming policy shift into monetary tightening and rising interest rates. 

Overseas fixed-income assets generated a 6.67% return on average as of end-August, outweighing the 0.14% gain from domestic bonds hit by rising interest rates.

Last year, the NPS reported a 9.7% return from investments, led by a 35% return from domestic equities. Alternatives returned 2.38% on average last year.

With 920 trillion won ($786 billion) in assets under management, the world's third-largest pension fund is aiming for more than a 10% IRR.

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