Soaring Kospi drives pension giant toward another record year
The National Pension Service, Korea's state-run pension fund and the nation's largest institutional investor, is ramping up its push for higher returns, with equities making up more than half of its total investments for the first time in the fund’s history.
As of end-August, the fund’s portfolio consisted of 14.8 percent domestic equities and 36.8 percent overseas equities, bringing its total equity allocation to 51.6 percent, according to NPS investment data.
It’s the first time the fund has invested more than half of its assets in stocks, traditionally considered riskier than fixed-income assets such as bonds. A decade ago, equities made up just 32 percent of its portfolio, while fixed-income accounted for 57 percent.
The shift reflects a steady push into global markets. The share of overseas equities climbed from 23 percent in 2020 to 31 percent in 2023 and 35.5 percent at the end of 2024, edging close to 37 percent this year. Under its midterm investment plan, NPS aims to boost global equities to 42 percent by 2029 and total overseas assets to 60 percent by 2028.
Earlier in the year, the fund’s chief investment officer explained that the strategy is designed to “generate long-term, stable returns” while “enhancing asset diversification” to cushion the portfolio during bouts of market volatility.
The rebalancing also advances the NPS’ goal of trimming domestic equity exposure to 13 percent by 2029 to ease its outsized influence on the local market. With about 1,300 trillion won ($911 billion) under management, NPS remains South Korea’s dominant institutional investor.
The share of overseas equities first surpassed domestic holdings in 2018, accounting for 17.7 percent of assets compared with 17.1 percent for local stocks. The gap has since widened, with foreign equities reaching 27 percent and domestic equities 14 percent in 2022, before the latter fell to 11.5 percent by the end of last year.
In contrast to 2024, when global assets led the NPS fund's performance, this year’s gains have been powered by a strong Kospi rally. Domestic equities returned 36.4 percent as of end-August, far outpacing other asset classes. Overseas equities gained 8.61 percent, domestic fixed income 2.85 percent, while global fixed income posted a 1.64 percent loss.
With the Kospi surging from around 3,180 to above 4,200 between September and October — a gain larger than the 790 points added during the first eight months of the year — industry estimates indicate that NPS assets have likely topped 1,400 trillion won. That would be a 200 trillion won jump from 1,212 trillion won at the start of 2025, an expansion unmatched by any public pension fund in the world.
The fund’s total return, which stood at 8.5 percent as of August, is also reported to have climbed past 20 percent, surpassing last year’s record-high 15 percent and likely marking the highest performance among major public pension funds worldwide this year.
jwc@heraldcorp.com
