The National Pension Service (NPS) posted a return of more than 15 percent this year and its fund size surpassed 1,700 trillion won ($1.25 trillion) in just four months, thanks to the government's decision at the start of the year to temporarily suspend the ceiling on domestic stock holdings. As the KOSPI continued its upward march from last year, the NPS's domestic stock allocation had effectively hit its limit, pushing the fund to the brink of mechanical selling. While some critics at the time argued that the public's retirement savings were being mobilized to prop up the stock market, the decision to suspend the ceiling is now being praised as the fund's size has swelled at an unprecedented pace.
According to government sources on Tuesday, the NPS's fund size surpassed 1,700 trillion won that day. The fund's return exceeded 15 percent, approaching last year's level of 18.82 percent. As of February, the NPS's fund return was preliminarily tallied at 10.26 percent, but the return appears to have increased significantly from February as Samsung Electronics (005930.KS) and SK hynix (000660.KS), which posted earnings surprises, saw their shares surge and drove up the index.
Earnings through Tuesday are estimated at more than 250 trillion won, similar to the total earnings for all of last year. The NPS's fund size grew by 260 trillion won, from 1,213 trillion won at the end of 2024 to 1,473 trillion won at the end of last year. By surpassing 1,700 trillion won on Tuesday, the fund has generated returns in just four months comparable to what it earned over the entirety of last year. According to the National Pension Service Investment Management, the NPS is estimated to hold stakes of 5 percent or more in approximately 1,300 companies. Given that there are roughly 2,600 listed companies in Korea, the NPS is invested in nearly half of them.
The substantial growth in the fund, which is responsible for the public's retirement savings, was driven by the government's abrupt adjustment of the domestic stock allocation in January. At the time, the NPS's domestic stock weighting was 14.4 percent, and considering the strategic asset allocation (SAA, ±3 percentage points), up to 17.4 percent of the total fund could be invested in domestic stocks. With the KOSPI soaring 75.63 percent last year, the possibility of mechanical selling under the ceiling emerged.
Under these circumstances, the Fund Management Committee raised the NPS's domestic stock allocation by 0.5 percentage point to 14.9 percent and decided to suspend the application of the ceiling until the mid-term asset allocation plan is finalized in the first half of this year. The move effectively lifted restrictions on domestic stock investment. "It is true that there were various criticisms at the time, but it is undeniable that lifting the ceiling ultimately had a positive impact on the fund's size," an official in the financial investment industry said. "Without the suspension of the investment ceiling in January, such results would have been difficult to achieve."
With expectations growing that the fund will set another record-high return this year following last year, the government will convene the Fund Management Committee later this month to finalize the mid-term asset allocation plan for 2027-2031. The committee reportedly views the current strength in Korean equities not as a temporary phenomenon but as a structural shift. If this view prevails at the committee, there is a possibility that the domestic stock allocation could be raised more significantly than initially expected.
