Korea teachers fund allocates $1 bn for new global alternatives in 2018

The Korean Teachers’ Credit Union (KTCU) plans to invest an additional 1.1 trillion won ($1 billion) in overseas alternative assets in 2018, out of the 1.6 trillion won it earmarked for this year’s new global investments.

The biggest retirement savings fund in South Korea, with $23 billion in AUM, will continue to focus on stable income-producing assets such as senior and mezzanine loans secured on cross-border commercial real estate on the prospect for interest rate hikes in major economies.

“KTCU will aggressively look for opportunities to invest in variable-rate loans such as direct lending which are set to benefit from US interest rate hikes,” KTCU’s Chief Investment Officer Sung-seog Kang said in a KTCU’s statement released on March 12.

Overall, it will boost the proportion of global portfolios to 40.1% by year’s end from last year’s 37.4%. (see table below)

Its AUM expanded by 11.6% to 25 trillion won ($23 billion) by end-2017 from a year earlier, and is projected to grow by 9% to 27.3 trillion won by end-2018.

Its average return on assets was 7.7% in 2017, beating its target of 4.4% and the previous year’s 5.3%.

Double-digit returns from both domestic and global equities lifted the return, while overseas alternative investments, which made up 24.2% of its AUM, returned 4.8% in 2017.

To boost alternative investments, KTCU said it had invested an undisclosed sum in a US value-add fund of Gaw Capital Partners last year.

It set up a $1 billion joint venture with the Teachers Insurance and Annuity Association of America – College Retirement Equities Fund (TIAA–CREF) to invest in US commercial real estate debt.