Korea's NPS posts 8% loss from investment in H1 2022

National Pension Service (NPS) of South Korea had an 8% negative return during the first half of 2022, its investment management arm announced on Aug. 29.

The Korean pension fund’s assets under management dropped to 882.7 trillion won ($654.2 billion) as of end-June, according to its preliminary assessment.

The rate of return on investment was negative 4.73% as of end-May. It further plunged by 327 basis points in the month following.   

The loss came as the Federal Reserve is working to reduce its balance sheet and global supply chain issues worsen amid the prolonged Russia-Ukraine war, NPS stated. These affected market sentiment as well as stocks and bonds the pension fund owns, it added.

NPS stated that the return rate recovered to the range of negative 4% as of Aug. 25, according to the preliminary assessment, as market volatility reduced and bond yield hikes slowed.    

By asset class, domestic equity showed the worst internal rate of return (IRR) in the first half, negative 19.58%. Overseas equity had a negative 12.59% IRR; domestic and overseas bonds had negative 5.8% and negative 1.55%, respectively. 

The alternative asset class was the only one to achieve a positive return, 7.25%. However, the annual IRR on the asset is highly likely to be lowered after reflecting the fair market value, which is forecast to have plunged due to interest rate hikes, at the end of this year.

The pension fund’s first-half loss increased the probability of a negative yearly rate of return. Since the investment management arm’s launch in 1999, the pension giant had negative annual returns twice, in 2008 and 2018.

The Korean pension fund said its first-half fund management fared slightly better than some global major institutional investors. The Government Pension Fund Global (GPFG), a Norwegian sovereign wealth fund, faced a 14.4% loss in the same period.

The US-based California Public Employees' Retirement System (CalPERS) and the Netherlands-based government and education employees pension fund ABP saw 11.3% and 11.9% losses, respectively.

Japan’s Government Pension Investment Fund (GPIF), the world’s largest retirement pension fund, had a 3% loss in the first half. The Canada Pension Plan Investment Board (CPPIB) saw a 7% loss, proving slightly better than NPS.

Write to Jun-Ho Cha at chacha@hankyung.com
Jihyun Kim edited this article.