The National Pension Fund's reserve fund is reported to have already exceeded the expected reserve for the end of 2025 as of November 2024. This is attributed to record-high fund management revenues last year due to favorable overseas investments. A larger reserve can contribute to delaying the depletion of the fund. The increase in the National Pension Fund's reserves over the past year is sufficient to cover pension expenditure for about four years.
◇ Reaching the estimated reserve a year early this year
According to the 'Portfolio Management Status and Revenue by Asset Class' data disclosed by the National Pension Fund Management Headquarters on the 28th, the total reserve fund of the National Pension Fund was 1,035 trillion 795 billion won at the end of 2023, which increased by 177 trillion 560 billion won to 1,212 trillion 851 billion won at the end of last year. Last year, it achieved a record-high investment revenue of 15.00% (money-weighted revenue), resulting in the reserve surpassing 1,200 trillion won for the first time.
According to the '2025 National Pension Fund Management Plan' approved by the Pension Fund Management Committee, the highest decision-making body in charge of managing the National Pension Fund, the target asset allocation for the end of 2025 is 14.9% for domestic stocks, 35.9% for overseas stocks, 26.5% for domestic bonds, 8.0% for overseas bonds, and 14.7% for alternative investments. The committee projected that if it successfully allocates surplus funds according to this target allocation, the fund reserves could increase to 1,176 trillion 552 billion won by the end of this year.
However, the National Pension Fund's reserves accumulated much more quickly than expected last year. Starting at 1,048 trillion 789 billion won in January, the fund's reserves exceeded 1,100 trillion won by March and reached 1,170 trillion 554 billion won by October. By November, just a month later, the reserves had risen to 1,185 trillion 211 billion won, surpassing the initial estimate of 1,176 trillion won for the end of 2025.
This is thanks to the National Pension Fund's continuously strong overseas investments last year. By asset type, the overseas stock revenue reached 34.32%, while overseas bonds and alternative investments yielded more than 17% revenue. Coupled with the strong performance of U.S. technology stocks, the exchange rate of the won against the dollar increased by more than 14% last year, further boosting the performance of overseas investments.
The National Pension Fund has budgeted a pension expenditure of 45 trillion 856 billion won for this year. This includes old age pensions (39 trillion 674 billion won), disability pensions (5 trillion 389 billion won), survivor pensions (4 trillion 192 billion won), and one-time refunds (1 trillion 450 billion won). The 177 trillion 560 billion won added to the fund's reserves over the year 2024 is enough to cover these pension expenditures for 3.8 years.
◇ The next candidate for high revenue is overseas alternative investments
Similar to last year, the National Pension Fund plans to focus on overseas investments this year. However, it is anticipated that the U.S. stock market will not soar as it did last year. Seowon, the Chief Investment Officer (CIO) of the National Pension Fund Management Headquarters, who recently succeeded in securing another year in office, is reported to be placing more weight on overseas alternative investments this year. Following the confirmation of his reappointment, he assigned Lee Jae-wook, who served as the head of the New York office for four years, to lead the Infrastructure Investment Division.
Starting this year, the National Pension Fund is also actively introducing a benchmark portfolio to strengthen its overseas and alternative investments. While the previous strategic asset allocation (SAA) specified target levels for each asset and measured their performance against benchmarks individually, the benchmark portfolio allows for a more comprehensive view that flexibly adjusts asset proportions according to market conditions without being restricted by segments between assets.
The National Pension Fund has invested 40% in private equity, 30% in real estate, and 30% in infrastructure within the alternative investment sector. However, with the introduction of the benchmark portfolio, there will no longer be a need to forcibly conform to these ratios, meaning more flexible investment decisions can be made. According to an analysis by the National Assembly Budget Office, improving the fund's management revenue by just 1 percentage point (P) can delay the depletion of the fund by about six years.
As part of its overseas alternative investment strategy, the National Pension Fund recently invested approximately 2.3 trillion won in the global real estate market. Notable investments include £300 million (about 532.2 billion won) in the U.K. real estate investment firm Long Harbour, $800 million (about 1.145 trillion won) in the U.S. real estate investment firm Almanac, and 700 million Australian dollars (about 633.2 billion won) in the Australian youth housing provider Scape. Seowon, the CIO, stated, "To enhance revenue, we will flexibly improve the asset allocation system and seamlessly promote investment diversification to manage the precious retirement funds of the public in a stable manner."