Key Takeaways:
South Korea's National Pension Service returned 27.22% in the first half, a record topping its best-ever full-year gain, driven by a 107.37% surge in domestic equities as the KOSPI doubled on AI chip demand.
"In the first half, we were able to deliver stable performance thanks to favorable conditions in domestic and overseas stock markets," Kim Sung-joo, chairman of the National Pension Service, said. "We will continue to do our utmost to generate long-term, stable returns through thorough risk management and diversified investment."
Assets reached 1,866 trillion won ($1.35 trillion) at the end of June, up from 1,458 trillion won at the close of 2025, with investment income of 401.4 trillion won accounting for nearly all of the 408 trillion won gain. The headline return is more than seven times the 3.81 percent average first-half return over the previous six years. Overseas equities returned 17.81 percent, alternatives 9.60 percent and overseas bonds 9.22 percent, while domestic bonds fell 3.00 percent as the three-year government yield climbed 74.6 basis points, more than three times the 20.7-basis-point rise in the U.S. 10-year Treasury yield.
The report captures performance near the peak of the rally. The KOSPI has since fallen almost 20 percent from its June-end level of 8,476.48 to about 6,818.87, and the won has strengthened to roughly 1,379 per dollar from 1,541.5, reversing part of the currency tailwind. If the correction deepens, the fund's 543.2 trillion won domestic equity stake — 29.1 percent of the portfolio — becomes its biggest vulnerability.
Samsung Electronics and SK hynix sit at the center of the global memory chip supply chain, and the AI investment boom turned that position into a revenue gusher. As hyperscalers and enterprise buyers ramped up spending on AI infrastructure, demand for high-bandwidth memory chips surged, sending Korean chipmaker valuations sharply higher. Easing Middle East tensions removed a layer of risk premium, and strong corporate earnings reinforced the rally with fundamental support.
The KOSPI's 101.14 percent gain through June dwarfed an 8.99 percent rise in global equities, making Korean stocks the clear outlier in a broadly positive world market. The result gives the world's third-largest pension fund, trailing only Japan's Government Pension Investment Fund and Norway's Government Pension Fund Global, an unusually large exposure to the same AI-driven wealth effect now running through Korea's corporate profits, exports and equity market. Domestic equities, at 29.1 percent of the portfolio, generated nearly all of the outperformance, while overseas stocks accounted for another 661.1 trillion won, or 35.4 percent, leaving almost two-thirds of financial assets exposed to equities.
The first-half return already exceeds the fund's record 18.82 percent full-year gain in 2025, though the periods are not directly comparable. The long-term annualized return since NPS began investing in 1988 stands at 8.04 percent, against 11.26 percent for domestic equities — a gap that shows how extraordinary the recent run has been.
The second half looks meaningfully different. Korean equities began correcting in July after the extraordinary first-half run, and the currency tailwind has partially reversed. The won's 7.43 percent depreciation against the dollar through June had inflated the won value of foreign assets, a boost that has since unwound as the currency strengthened. NPS disclosed no investments in digital assets for the reporting period, keeping its allocation focused on public equities, bonds and alternatives — a stance that left it out of the crypto rally but also insulated it from that market's swings.
The record return shows the concentration risk embedded in the fund's domestic equity bet. With the KOSPI already down nearly a fifth from its June peak, the second half will test whether NPS can defend the gains that made its first half historic. Chairman Kim acknowledged the increased volatility, saying some of the first-half gains have fluctuated while overall performance remains favorable. If chip demand holds and the index stabilizes, the fund could still post a strong full-year result; if the correction deepens, the domestic equity concentration will weigh on returns into 2027.
This article is for informational purposes only and does not constitute investment advice.
