Korea’s NPS sees record assets, profit on double-digit return

South Korea’s National Pension Service (NPS) enjoyed record assets and profit in 2023 as the world’s third-largest pension fund reported a double-digit return for the first time in two years on robust stock markets across the globe.  

NPS’ assets under management (AUM) were estimated to have topped 1,000 trillion won ($764.8 billion) as of Dec. 31, 2023, exceeding the level annually for the first time, according to investment banking industry sources in Seoul on Tuesday. AUM, which stood at 890.5 trillion won as of end-2022, briefly peaked above 1,000 trillion won in September last year but fell to 968.3 trillion won as of end-October.

The pension fund’s cumulative profit was also estimated to have exceeded the 100 trillion won mark in 2023, raising its return to 10% from a loss of 8.22% in the previous year. The fund reported a 10.77% return in 2021.

Stock markets at home and abroad gained last year on solid corporate earnings and growing hopes for interest rate cuts amid a global economic slowdown. South Korea’s main Kospi advanced 18.7%.

The 2023 AUM has yet to assess the fair value -- broad measures of assets’ intrinsic worth -- of NPS’ alternative assets including real estate, private equity investment and infrastructure. The fund reflects their annual fair value assessment around June of the following year. So, the return for 2023 may fall below 10%, given recent weakness in property markets, industry sources said.

STOCK MARKETS ARE KEY

Stock market performances are expected to influence NPS’ assets and profit this year, those sources said. In 2023, global shares unexpectedly rose despite sluggish economic growth, helping the fund enjoy healthy returns.

US inflation is forecast to stabilize around the Federal Reserve’s official 2% target, increasing hopes of a soft landing for the world’s top economy. The US central bank may start cutting interest rates from as early as March, some economists said, which will power global stock markets despite increasing uncertainties over the US presidential election in November later this year.

NPS has taken measures to boost profits. The fund strengthened the authority of overseas offices to let them make quick investment decisions while allowing them to hire local personnel.

“We should strive to create a dynamic organizational culture that is not afraid of change based on our experience and capabilities,” said NPS Chairman Kim Tae-Hyun in a New Year speech. “We have to overcome the big and small difficulties we will face by communicating with open attitudes and respecting each other.”

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com
 

Jongwoo Cheon edited this article.