GEPS posts 19.4% return from alternative investment in 2021

Government Employees Pension Service (GEPS) of South Korea posted a 8.61% rate of return in 2021, the pension fund announced on March 15.

It has earned a 2.4 trillion won ($1.9 billion) return from investment over the past three years, increasing its assets under management to 10 trillion won as of the end-2021. The pension fund earned 9.56% and 10.5% returns in 2019 and 2020, respectively.

By asset classes, its overseas equities earned a 29.62% return. Alternative investment and domestic equities posted 19.37% and 5.76% returns, respectively. Domestic and overseas bonds, impacted by global interest rate hikes, saw a 1.17% loss.  

Overseas equities achieved the high return thanks to large exposure to developed countries that benefit from global reflation and reopening stocks, GEPS said. The return from domestic and overseas equities was 15.74% last year, it added.

The return from alternative investment was backed by increased holding value and active investment strategies, GEPS stated. Overseas private equity saw hikes in valuation gains, and domestic private equity executed successful exits via initial public offerings.

Real assets realized gains through increased value in domestic infrastructure funds and sales of overseas funds. 

GEPS ramped up exposure to overseas investment proportion from 20% to 21.7% and increased alternative investment from 24.1% to 28.6% last year, forecasting the assets will outperform in the market volatilities. The pension fund decreased a combined proportion of equities and bonds in the domestic traditional assets from 55.9% to 49.7%.  

Also, it increased exposure to environmental, social and governance investing from 5.4% to 7.8% last year, as well as establishing a mid-to-long-term roadmap for ESG investment. 

GEPS’ alternative investment reaches 2 trillion won ($1.6 billion), and overseas assets make up for around 50%, according to Korea Economic Daily’s Asset Owners Report released in February. Overseas private debt and real estate respectively account for 20% and 15% of the alternative assets. Overseas absolute return strategies, private equity and infrastructure follow with 7.5%, 4% and 1.5%, respectively.

The pension fund will increase the alternative investment to 2.7 trillion won by the end of 2024, as well as boost exposure to overseas private equity, debt, real estate and infrastructure. It will maintain the current proportion of absolute return strategies, the pension fund said in the Asset Owners Report.

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