Asset Market Full of Uncertainty... Pension Fund Returns Are Not Easy

Continued Political Turmoil from US Trade War and Yoon's Impeachment
Alternative Investments Also Uncertain... Regulatory Pressure and Administration Change Add Variables

As domestic and international uncertainties escalate, the profit rate burden on major pension funds is also increasing. Although only the first quarter has passed, if shocks accumulate in the asset market going forward, it could negatively impact the returns of pension funds, which are long-term investors.

According to the financial investment industry on the 8th, the National Pension Service's operating return rate at the end of January was recorded at 0.85%. This contrasts with last year's fund operating return rate, which reached 15%. For the Government Employees Pension Service, the monthly returns this year were 1.16% in January and 1.47% in February. The Teachers' Pension also recorded monthly returns of 0.76% in January and 1.29% in February. These figures are below the KOSPI returns of 4.85% in January and 2.59% in February during the same period.

Of course, when looking at returns by detailed sectors, the stock sector outperforms the KOSPI returns. The National Pension Service's domestic stock return rate for the first quarter of this year was 5.38%. The Government Employees Pension Service also achieved returns of 4.73% and 5.74% in January and February respectively in domestic stocks (based on direct investment).

However, since the domestic stock market began to retreat last month, there is no room for complacency. In particular, major issues such as the presidential impeachment and the US-origin tariff war have shaken domestic and international financial markets, causing global stock markets to fluctuate. The outlook for all assets, including bonds and alternative investments beyond just stocks, has become uncertain. This is the background for pension funds, which diversify investments across various assets, to be on edge.

Especially in the alternative investment sector such as real estate, the winter is expected to continue for the time being. Domestic real estate is likely to be significantly affected by the early presidential election, as policy directions vary greatly depending on the administration. Critical public opinion regarding private equity firms (PEFs) like MBK Partners is also a burden. The situation worsened with Homeplus's sudden corporate rehabilitation application, prompting financial authorities to launch an investigation. According to the industry, the Financial Supervisory Service is investigating the possibility of unfair trading by MBK Partners related to the Homeplus incident. Alongside this, a full investigation is underway targeting the top 30 domestic PEF management firms.

Even pension funds that achieved record-breaking returns of over 10% last year are expressing uncertainty about this year's returns. Last year, the National Pension Service recorded a 15% operating return, the Teachers' Pension 11.6%, and the Government Employees Pension Service 11.5%. An industry insider said, "With the external environment freezing up and domestic uncertainties abundant, if shocks to the asset market increase, cumulative returns could decline further. We are definitely watching the market more cautiously than in previous years."