Performance of Active and Passive Management of Korea's NPS Funds

We evaluate the performance and the performance persistence of actively and passively managed domestic equity funds of Korea's National Pension Service (the NPS) during the period 2002 to 2011. The results show that active funds did not statistically outperform passive funds during the sample period, and the superior performance of some active funds was driven not by skill but by luck. Our results are consistent with those of earlier research on US institutional investment products, and provide empirical support for the NPS's recent shift in investment policy from active management to passive management.