South Korea’s National Pension Fund reported a -8.2% investment return for 2022 and a 6.1% drop in assets to 890.5 trillion won ($706.4 billion).

Domestic equity in the portfolio accounted for the biggest loss at -22.8%, followed by overseas equity at -12.3%, according to a statement by the Jeonju-based pension fund on March 2.

“Domestic and overseas equity portfolios experienced a sharp drop in value due to ongoing market volatility at home and abroad triggered by the prolonged war in Ukraine and the U.S. Federal Reserve’s aggressive tightening stance to tame surging inflation,” the statement said.

The Korean Composite Stock Price index fell 24.9% in 2022, and the MSCI All Country World index ex-Korea fell 17.9%.

The fund’s fixed income portfolio also suffered losses, with domestic fixed income posting -5.6% returns, and overseas fixed income returning -4.9%. Alternatives, however, had positive returns of 8.9%.

The statement cited rising interest rates and a persistent monetary tightening stance as reasons for fixed-income securities values falling.

“Alternatives achieved higher returns than those of traditional assets on the back of capital appreciation and realized gains from real estate and infrastructure assets, as well as a rise in the USD/KRW exchange rate,” the statement said.

The fund also adjusted its portfolio during the year, most notably in alternatives, with an increase in allocation to 16.4% from 12.6% in 2021.

It reduced its allocation to domestic equity, to 14.1% from 17.5%, as well as to domestic fixed income to 34.9% from 35.8% in 2021. The overseas equity allocation rose slightly, to 27.1% from 27%. The remainder is invested in short-term assets.

“Heightened external uncertainty made 2022 an extremely rare year where both equity and fixed income tumbled together,” said Chairman and CEO Kim Tae-hyun. “Looking ahead, I expect that financial markets will maintain recovery pace and the fund will generate better returns in 2023,” he wrote.

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