NPS Posts 4.42% Return in Q1 Amid Middle East Risks

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\r\n[Financial News] The National Pension Service Fund Management Headquarters said on the 29th that the NPS fund reserves reached 1,526 trillion won in the first quarter of this year. The period return was 4.42%, based on a preliminary money-weighted rate of return.
The result reflected gains in domestic stocks and foreign-exchange translation gains on overseas assets as the won strengthened, even amid external geopolitical uncertainty such as the war between the United States and Iran.
By asset class, domestic stocks posted a return of 21.67%, the strongest performance among all assets. Although investor sentiment was somewhat dampened by the war in the Middle East, the sector continued to benefit from strength led by semiconductors. Over the same period, the domestic stock market, the Korea Composite Stock Price Index (KOSPI), rose 19.89% from the end of last year.
Overseas stocks, meanwhile, returned -0.11% as geopolitical tensions increased global risk aversion. Even so, the decline was relatively limited compared with the -5.36% drop in the MSCI ACWI ex-Korea, measured in U.S. dollars.
Bond and alternative investment assets showed mixed results amid inflation concerns and exchange-rate fluctuations. As oil prices pushed interest rates higher, domestic bonds recorded a return of -2.03% due to valuation losses. During the period, the yield on the 3-year Korean Treasury bond rose 60.4 basis points from the end of last year to 3.555%.
Overseas bonds returned 4.98% as the won–dollar exchange rate rose 5.47% from the end of last year to 1,513.4 won, generating translation gains. The yield on the 10-year U.S. Treasury note climbed 18.1 basis points from the end of last year to 4.348%.
Alternative investments posted a 5.27% return, supported by interest and dividend income as well as foreign-exchange translation gains from currency movements. However, quarterly returns for alternative investments did not reflect fair value assessments.
Performance in the first quarter was highly volatile from period to period because of the fallout from the war in the Middle East. As of the end of February, cumulative return since the start of the year stood at 10.26%, but financial market volatility widened after the outbreak of the U.S.-Iran war, bringing the first-quarter period return to a preliminary 4.42%.
Still, the result is considered solid compared with major overseas pension funds. Among pension funds that have disclosed quarterly returns, the Government Pension Fund Global posted -1.9%, while ABP returned -0.5%.
Chairman Kim Sung-joo of NPS said, "The investment return for the first quarter fell somewhat from the end of February because of the war in the Middle East, but it has since recovered and is showing solid performance." He added, "As a long-term investor, we will do our utmost to improve returns through an investment philosophy that remains steady under any difficult circumstances and through rigorous risk management."
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elikim@fnnews.com Kim Mi-hee Reporter