NPS Posts Loss in Q1 2022 Amid Concerns over Monetary Tightening and Geopolitical Risk

- Despite tumbling global equity markets and rising interest rates, the NPS performed relatively well compared with other major global pension funds -

□ The National Pension Service Investment Management (NPSIM), a dedicated fund management arm of the National Pension Service (NPS; Interim Chairman &　CEO and Executive Director　for Planning, Jungbae Park), announced on May 27, 2022 that the National Pension Fund amounted to KRW 928.7 trillion as of March 31, 2022 and recorded a -2.66% return in the first quarter.

○ The primary trigger behind the negative return is the sharp plunge in stock markets at home and abroad, driven by a combination of fears about monetary tightening in major economies and geopolitical risk stemming from the Russia-Ukraine war.

□ By asset class, domestic equities returned -5.38% for the quarter ended March 31, 2022; global equites, -2.98%; domestic fixed income, -2.87%; global fixed income -3.00%; alternative assets, 2.36%.

* The returns above are calculated using a money-weighted method.

○ Concerns over soaring inflation and the Fed’s aggressive monetary policy have stirred up volatility in equity markets worldwide and led to higher bond yields, which have taken a toll on the performance of equities and fixed income in the NPS’s portfolio. Meanwhile, foreign exchange gains arising from a strong U.S. dollar contributed to compensating for some losses in overseas assets.

* Domestic Stock Market (KOSPI): down 7.39% from Jan. to Mar. 2022
Global Stock Market (MSCI ACWI ex-Korea, USD): down 3.94% from Jan. to Mar. 2022
USD/KRW exchange rate: up 2.13% from Jan. to Mar. 2022

* Korea Treasury (3-year): up 86.7bp, Korea Treasury (10-year): up 71.9bp

* U.S. Treasury (10-year): up 83.9bp

□ The prospects of interest rate hikes, monetary tightening and surging inflation have weighted on investor sentiment across the globe in the period.

○ A sharp downturn in global stock markets had an adverse effect on the first quarter performance of a majority of global pension funds. It is observed that the NPS performed relatively well among leading pension funds that disclosed their investment results for the quarter.

<Return in Q1 2022>

Sources: GPFG, ABP and CPPIB websites

□ “As a long-term investor, the NPS will make all-out efforts to manage risk and source the best possible investment opportunities in a bid to contribute to financial stability of national pension through enhanced long-run profitability,” says an official of the NPS.

<Annex> National Pension Fund as of March 31, 2022