Korea funds seek investment experts from outside; CIOs chair review committees

The Public Officials Benefit Association (POBA) has replaced the head of its investment review committee recently with the Chief Investment Officer Dong-hun Jang from its board chairman, as it is embracing a variety of investment assets to boost returns.

POBA, a South Korean savings fund for local public officials, has also added an outside member to the 9-strong review committee in place of board chairman and CEO, Sang-soo Yoo.

“The move seems to indicate that they will rule out political judgement at the investment review committee and focus on investments,” said a financial industry source.

The first investment case that the POBA’s review committee endorsed with the new outside board member was a logistics center under construction near Seoul. According to local media reports early this month, POBA will extend 35 billion won ($30 million) worth of project financing to the development project. It was also the first investment by a domestic savings fund in a construction project in the development stage.

For the Korea Scientists and Engineers Mutual-aid Association, CIO Do Yeong Jeong has taken over a control of its investment review committee from Chairman Yul-rae Cho. The chairman reshuffled the 10-member review committee soon after he took office last August and increased the number of outside committee members to eight. Cho also changed the way of voting at the committee from a show of hands to secret voting.

Separately, the Police Mutual Aid Association is now in the process of receiving applications from outside to lead its financial investment division. The fund used to have police officers with no investment background take charge of asset management. But last March, PMAA decided to hire an outside expert as its new financial investment head.

As returns on traditional investment assets such as bonds and stocks have been tumbling, South Korean savings funds are being introduced with new types of alternative investments which they have never done before, said a source of a South Korean institution (LP).

“To make bolder investments, it is advantageous to have experts with a deep understanding about the relevant industry chair the investment review committee,” said the source.

“Given that the Teachers’ Credit Union, which has had its board chairman serve as CIO, has been earning steady returns, they are going into a right direction,” he added.

At the Korean Teachers’ Credit Union (KTCU), CIO has been chairing its investment review committee since the launch of the committee, which is composed of three outside members and two from within.

KTCU has been standing out with handsome returns on alternative investments, compared with other domestic pension and savings funds. Last year, it secured 6.3% and 6% returns on financial investments and real assets, respectively, in the segment of domestic alternatives. In overseas alternatives, it earned 9.3% and 5.8% returns on financial investments and real assets, respectively.