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NPS Posts Loss in Q3 as Global Equity and Fixed Income Markets Slide amid Monetary Tightening

- In the face of global headwinds, its alternative investment and overseas fixed income portfolios fared well -

□ The National Pension Service Investment Management, a dedicated fund management arm of the National Pension Service (NPS; Chairman & Chief Executive Officer Kim Tae-hyun), announced on November 29, 2022 that the National Pension Fund had a preliminary value of KRW 896.6 trillion as of September 30, 2022 and recorded a -7.06% return in the January-September period.

○ By asset class and on a money-weighted rate of return basis, domestic equities returned -25.47%, overseas equites -9.52%, domestic fixed income -7.53%, overseas fixed income 6.01%, and alternatives 16.24%.

□ The negative returns for three consecutive quarters in 2022 were driven largely by global equities and fixed income tumbling in tandem throughout the year.

○ The Federal Reserve’s aggressive monetary policy tightening with its third straight 75 basis point increase, the prolonged war in Ukraine, rising commodity prices, worsening supply chain disruptions, and soaring inflation were among the headwinds facing the global economy.

○ Moreover, the higher-than-expected consumer price index in the U.S. in September, the growing energy crisis in Europe, and the financial instability in the U.K. have added more pressure to already volatile equity markets worldwide.

□ In the third quarter, alternative assets recorded positive returns, mostly deriving from interest income, dividends and capital appreciation from a rise in the USD/KRW exchange rate.

○ The fair values of alternative assets are not reflected in the return of the asset class during the year, as the valuation is conducted annually at year end.

Indicators	Q1 End (Mar. 31)		Q2 End (Jun. 30)		Q3 End (Sept. 30)
		Compared to 2021 End		Compared to 2021 End		Compared to 2021 End
KOSPI	2,757.65	-7.39%	2,332.64	-21.66%	2,155.49	-27.61%
S&P500	4,530.41	-4.95%	3,818.83	-19.88%	3,640.47	-23.62%
Global MSCI ACWI (ex-Korea, USD)	2,039.27	-3.94%	1,718.86	-19.03%	1,600.76	-24.60%
Korea Treasury (3-Year)	2.662%	86.7bp	3.553%	175.8bp	4.185%	239.0bp
U.S. Treasury (10-Year)	2.349%	83.99bp	3.089%	157.9bp	3.786%	227.6bp
USD/KRW Exchange Rate	1,210.80	2.13%	1,292.90	9.06%	1,434.80	21.03%
Oil Price (WTI, USD/BBL)	100.28	33.33%	105.76	40.62%	79.49	5.69%

□ Meanwhile, foreign exchange gains resulting from the strong U.S. dollar contributed to offsetting the decline in the value of the NPS portfolio.

○ The U.S. dollar surged 21% against the local currency as the dollar continued to strengthen on the back of the U.S. monetary policy stance and the preference for safe assets in the dollar.

□ Kim Tae-hyun, Chairman & CEO of NPS, said, “The global investment landscape has faced a complex crisis combining high inflation, high interest rates and low growth.” He added, “The National Pension Service will spare no effort to further improve returns by diversifying its portfolio and sourcing the best investment opportunities.”

National Pension Fund as of September 30, 2022

Appendix

National Pension Fund as of September 30, 2022

□ Fund Status

Revenues KRW 1,187.0 trillion			Expenses KRW 290.4 trillion
KRW 724.1 trillion (Contributions, etc.)			KRW 279.7 trillion (Pension Benefits)		The Fund KRW 896.6 trillion
			KRW 10.7 trillion (General & Administrative Expenses, etc.)
					KRW 894.8 trillion (Financial Assets)
KRW 462.9 trillion (Investment Income)
					KRW 1.8 trillion (Welfare Sector and Others)

□ Investment Performance

(money-weighted return, KRW trillion, %)

		Q3-End 2022 (as of Sept. 30, 2022)			2021	3-Year (‘19~’21)	5-Year (‘17~’21)	Since Inception (‘88~’21)
		Return	Value	Weight	Return	Return	Return	Return
Total		-7.06	896.6	100.00	10.77	10.57	7.90	6.76
Financial Assets		-7.07	894.8	99.8	10.79	10.59	7.92	6.72
	Domestic Equity	-25.47	121.7	13.6	6.73	17.55	11.89	8.71
	Overseas Equity	-9.52	247.5	27.6	29.48	23.24	16.77	14.05
	Domestic Fixed Income	-7.53	303.1	33.8	-1.30	1.26	1.82	4.04
	Overseas Fixed Income	6.01	70.3	7.8	7.09	5.56	4.56	4.75
		16.24	150.7	16.8	23.80	12.29	10.92	10.13
	Alternatives
	Short-term Assets	2.62	1.5	0.2	1.10	0.85	1.03	3.39
Welfare Sector		1.31	0.2	0.0	-2.19	-2.08	-1.91	5.94
Others		0.50	1.6	0.2	0.46	0.71	0.74	1.45

□ Return in Financial Assets

(time-weighted return, %)

		Q3-End 2022	2021	3-Year (‘19~’21)	5-Year (‘17~’21)
Financial Assets		-7.11	10.86	10.59	7.54
	Domestic Equity	-25.55	5.88	17.04	10.97
	Overseas Equity	-9.72	29.77	23.48	14.49
	Domestic Fixed Income	-7.53	-1.25	1.32	1.84
	Overseas Fixed Income	6.01	7.26	6.39	4.70
	Alternatives	16.32	23.97	11.78	10.37
	Short-term Assets	3.30	1.69	0.84	1.17

□ Market Indices

	2021		2022
	Year-End	Y-O-Y	Q3-End	Compared to 2021 End
KOSPI	2,977.65	3.63%	2,155.49	-27.61%
S&P500	4,766.18	26.89%	3,640.47	-23.62%
MSCI ACWI (ex-Korea, USD)	2,122.93	19.38%	1,600.76	-24.60%
Korea Treasury (3-Year)	1.795%	82.5bp	4.185%	239.0bp
U.S. Treasury (10-Year)	1.510%	59.7bp	3.786%	227.6bp
USD/KRW Exchange Rate	1,185.50	8.96%	1,434.80	21.03%
Oil Price (WTI, USD/BBL)	75.21	55.01%	79.49	5.69%