NPS returns rose to 3.5% in July as stocks rebounded

South Korea’s National Pension Service (NPS) recorded better returns on fund management in July after a weak performance in the first half, as expectations of vaccine development and stimulus measures by major countries boosted stock markets.

The state pension fund’s monthly fund management report, released on Monday (September 28) reported that overall cumulative investment returns were tentatively estimated at 3.56% at the end of July, with an increase of 3.06% points in that month. NPS eked out a 0.5% return on financial investments in the first six months.

On an assets basis, domestic stocks posted a return of 4.64% in July, overseas stocks 2.42%, domestic bonds 2.48%, overseas bonds 8.64% and alternative investments 4.85%.

NPS’ financial investment returns (%)

Asset typeReturn (July, 2020)Return (H1, 2020)Average return (1988 to July, 2020)% of portfolio(July, 2020)
Domestic stocks4.64-2.415.4818.2
Overseas stocks2.42-3.468.4622.8
Domestic bonds2.842.134.5942.0
Overseas bonds8.647.95.514.9
Alternative investment4.854.248.2811.8
Average3.560.55.54
(Source: NPS)

The pension plan said that the partial recovery of the local and overseas stock markets, which was depressed by the spread of the Covid-19 pandemic in the first half, had been a key factor in the stronger returns. Domestic and foreign bonds gained in valuation as monetary policies were eased in major countries and concerns rose over slowing global economic growth.

Investment gains from alternative assets, which are based on their interest and dividend incomes, were also boosted by foreign exchange gains from the weak South Korean won, NPS added.

The average annual cumulative return since NPS was established in 1988 has been 5.62%. Accumulated profits during the period have been 393.6 trillion won, with the fund boasting total assets of 776.6 trillion won at the end of July. NPS is the world’s third biggest pension fund. (Reporting by Kyoungho Lee)