Returns from South Korea’s National Pension Service, Seoul, the nation’s biggest investor, slowed last year as a slump in global equity markets countered gains from alternative investments.
The 345 trillion won ($306 billion) pension fund posted a preliminary 2.3% return in 2011, the Ministry of Health and Welfare said in an e-mailed statement Monday. That compares with a 10% gain in 2010.
South Korea’s benchmark Kospi index dropped 11% last year, the most since 2008, while the MSCI World index sank as Europe’s debt crisis and a slowing U.S. economy hurt global growth. The fund had 17.8% of its assets in domestic stocks at the end of 2011, the statement said.
In comparison, the $234.3 billion California Public Employees’ Retirement System, Sacramento, the largest U.S. public pension fund, earned 1.1% in 2011.
“The Korean fund’s returns weren’t bad last year, and the slowdown was inevitable because of higher volatility in equities,” said Chang In Whan, president of Seoul-based KTB Asset Management, which oversees the equivalent of $5.8 billion.
National Pension had 64.5% of its assets in domestic bonds at the end of last year, the welfare ministry said in its statement. “Overseas alternative investments” accounted for 3.3%, and include a shopping mall near Paris, London’s Gatwick Airport and Colonial Pipeline, operator of the pipeline linking U.S. Gulf Coast refiners and East Coast markets.
The South Korean fund aims to have at least 20% of assets in domestic equities by the end of 2016, while domestic bonds will make up less than 60%, it said in June. The Kospi has gained 9.3% this year.
The fund will announce final figures for 2011 in June, according to the statement. National Pension, which was set up in 1988, covers private-sector employees and the self-employed.