South Korea’s state pension fund National Pension Service said on Tuesday that it posted the highest return on investment in 10 years in 2019 largely due to the bullish stock markets here and abroad.

The state-run pension fund marked an estimated rate of return of 11 percent last year, raking up a whopping 70 trillion won ($59 billion), according the NPS. The yield is the largest since 2010 when the fund operator marked 10.37 percent.

In 2018, the NPS posted a negative yield of 0.92 percent on-year -- the second negative rate on record since 2008 -- suffering from sluggish global equity markets. At that time, other state-run funds, including Government Pension Investment Fund of Japan, and California Public Employees’ Retirement System of the US, also logged a negative ROR, according to officials.

The price recovery of stocks linked to semiconductors, in combination with a weak Korean currency against the greenback, has mainly driven the on-year increase in ROR last year, according to the fund operator.

The NPS is the third-largest pension fund in the world with its assets under its management reaching some 724 trillion won as of end-November. Since its launch in 1988, the fund’s accumulative yield stands at 5.7 percent with the total profit so far coming in at 357 trillion won.

Although the state pension fund looks quite profitable on the surface, its investment performance has been overstated for years, according to local news reports. They also raised questions based on their reports that the institute handed out excessive bonuses to its executives and employees based on the inflated profits.

Being exempt from paying all or some of the dividend tax in global markets, state-run fund operators, like the NPS, receive the deducted amount every year. The Korean state fund institute, however, has reportedly considered the deducted amount as excess earnings on its books, making its ROR higher than the actual figure.

“The NPS has recently recognized the issue as it has started expanding foreign investments in recent years,” an industry source was quoted as saying by weekly economic magazine Maekyung Economy. With the robust returns last year, NPS executives and employees are expected to receive generous bonuses, up to 100 percent of their base salaries.

Some market experts said such irresponsible management could put pressure on the public, considering the state fund is forecast to run dry by 2057 due to a low fertility rate, rising aging population, and slowing economic growth. They also urged the fund operator to fix the earnings evaluation system before the problem becomes too big to fix.

The NPS plans to increase the proportion of foreign stocks in its investment portfolio from 22.6 percent in 2019 to 50 percent in 2024.

By Kim Young-won (wone0102@heraldcorp.com)