NPS logs 0.87% return from first-quarter investment

The National Pension Service (NPS), South Korea’s state-run pension fund and the country’s largest institutional investor, announced on Friday it logged a 0.87% return from its investment activities in the first quarter, thanks to the solid performance of domestic equities.

At last quarter’s return rate, the state pension fund earned 14 trillion won ($10.1 billion) in investment gains, elevating its total assets under management to 1,227 trillion won at the end of March.

The world’s third-largest pension fund by total assets posted a positive return despite high volatility in global financial markets amid growing uncertainty from the US threat to impose hefty taxes on imports.

Investors’ appetite for undervalued domestic equities revived amid growing expectations for local corporate earnings, more than offsetting losses from the NPS investment in offshore equities, said the national pension fund.

“The global investment environment remains challenging this year, especially surrounding the US, but we will continue to diversify our portfolio to achieve both profitability and stability,” National Pension Service Chairman Kim Tae-hyun said in a statement.

BY ASSET CLASS

NPS investment in domestic equities delivered a 4.97% return, followed by domestic bonds at 2.03% and alternative investments at 1.32%. Overseas bonds yielded a 1.05% return.

Investment in foreign equities, however, posted a 1.56% loss in the quarter amid growing uncertainty in US tariff policies, which fanned concerns about possible stagflation, a situation where economic growth stagnates while inflation remains elevated.

The state pension service’s investment in both domestic and overseas bonds logged gains on expectations for rate cuts by central banks to shore up the economy, including one by the Bank of Korea in February.

Alternative investments, including real estate, infrastructure and private equity, continued to perform well.

Targeting higher returns, the NPS plans to raise its equity allocation to about 55% of its assets by 2030 from 40.4% as of the end of February, as it increases its risk appetite to more actively deploy capital in line with rapid asset growth under its mid-term portfolio adjustment plan.

The Ministry of Health and Welfare, which oversees the NPS, said on Thursday that the state pension scheme will bump up its exposure to both domestic and overseas stocks to 14.4% and 38.9%, respectively, by 2030.

As of the end of February, domestic and overseas stocks accounted for 12.5% and 35.4% of its portfolio.

The national pension scheme delivered an all-time high 15% return from its investment activities in 2024, buoyed by a US stock rally and gains from alternative investments. 

Write to Gyeong-Jin Min at min@hankyung.com

\Sookyung Seo edited this article.