South Korea’s National Pension Service posts 27% return in first half as domestic stocks double

South Korea’s National Pension Service delivered a 27.22% preliminary return in the first half of 2026, a result so lopsided it nearly eclipses the fund’s best-ever full-year performance before summer even ended.

The engine behind those gains: domestic equities returned 107.37% over the same period, powered by a KOSPI index that roughly doubled from its end-of-2025 level.

Inside the numbers

NPS reported total assets of 1,866 trillion won (approximately $1.35 trillion) as of the end of June, up from 1,458 trillion won at the close of 2025. That’s roughly 408 trillion won in growth over six months, with investment income alone accounting for 401.4 trillion won.

The fund’s previous record was an 18.82% full-year return in 2025, itself the highest annual return since NPS began investing in 1988. The first half of 2026 already blew past a milestone that took all of last year to set.

Domestic equities did the heavy lifting. NPS holdings in Korean stocks reached 543.2 trillion won by the end of June, representing 29.1% of the total portfolio. The KOSPI’s surge of roughly 101% through the first half was driven overwhelmingly by semiconductor firms, particularly Samsung Electronics and SK hynix, which benefited from surging demand tied to the AI investment cycle.

Overseas equities contributed a respectable 17.81% return. Alternative assets posted 9.6%. Domestic bonds fell 3%. Overseas bonds returned 9.22%.

What drove the KOSPI’s explosive rally

Samsung Electronics and SK hynix sit at the center of the global memory chip supply chain, and the AI boom has 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 geopolitical tensions in the Middle East also helped remove a layer of risk premium that had weighed on global markets. Corporate earnings across Korean companies came in strong, reinforcing the rally with fundamental support.

The KOSPI’s long-term annualized return since NPS inception sits at 8.04%. A sharp pullback reportedly began in July.

What this means for institutional investors

NPS is the world’s third-largest pension fund, trailing only Japan’s Government Pension Investment Fund and Norway’s Government Pension Fund Global.

Domestic equities, at 29.1% of the portfolio, generated nearly all of the outperformance. With the KOSPI already pulling back in July, the second half of 2026 could look meaningfully different from the first.

NPS disclosed no investments in digital assets for this reporting period, keeping its allocation focused on public equities, bonds, and alternatives.

The fund’s long-term annualized return of 8.04% since inception sits against domestic equity holdings of 543 trillion won that become a vulnerability if the KOSPI correction deepens.

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