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NPS logs 9.6% annual investment return in 2020

Minister of Health and Welfare Kwon Deok-cheol speaks at a meeting of the asset management committee of the National Pension Service in Seoul on Friday. (Yonhap)
Minister of Health and Welfare Kwon Deok-cheol speaks at a meeting of the asset management committee of the National Pension Service in Seoul on Friday. (Yonhap)
South Korea’s public pension fund National Pension Service posted an annual return rate of 9.58 percent last year, marking the second-highest record in a decade, the nation’s welfare minister said Friday.

“Last year’s figure stood at 0.99 percentage point higher than our benchmark of 8.59 percent. ... The amount of profit earned from the investment also came to 72.1 trillion won ($63.6 billion),” said Kwon Deok-cheol, minister of health and welfare, who chairs the NPS’ asset management committee.

The combined value of the NPS’ return is about 1.4 times of the pension fund’s insurance earnings of 51.2 trillion won, and nearly 2.8 times of citizens’ totaled annuity payments at 25.6 trillion won, according to Kwon.

The NPS’ average annual return rate for the last three years came in at 6.54 percent, while the figure for the past half-decade recorded 6.31 percent. Both results surpassed its benchmarks, thanks to the record-setting returns in 2020 and the year before. The pension fund chalked off a 10-year record high of 11.34 percent in return in 2019.

Of its portfolio exposures, investment on domestic equities marked the highest return of 34.66 percent, followed by overseas equities with 10.22 percent. While local bonds investment generated 1.71 percent in return, overseas bonds and alternative investments recorded 0.19 percent and 2.57 percent, respectively.

The welfare minister gave credit to the pension fund’s asset managers for managing risks and enhancing return rates amid higher uncertainty over the COVID-19 pandemic. As recognition of their efforts, they will be given performance-based bonuses worth 86.7 percent of their salaries to be doled out in two separate batches this year and the next.

The NPS also set its policy proposals for this year during the meeting, which includes improvements on their environmental, social and governance evaluation system, consignment operation of alternative investments and management capacities of operation cost.

“The global economy has entered the transition period from crisis to recovery. There is a possibility that both domestic and overseas market volatility will increase,” the minister said. “The NPS vows to improve the pension fund’s operating system continuously to generate steady investment performance with our citizens’ precious assets.”

By Jie Ye-eun (yeeun@heraldcorp.com)
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