Korean military fund to double average investment size

South Korea’s Military Mutual Aid Association (MMAA) intends to nearly double its average investment size to 100 billion won ($88 million) as it is aiming to boost allocations to project funds and direct investments for alternative assets.

The $11 billion retirement fund will aggressively chase investments in new growth businesses and in relation to Green New Deal initiatives aimed at cutting greenhouse gas emissions, while reducing dependence on blind pool funds, the MMAA said in a statement on Mar. 30 released to report 2020 results.   

"To achieve a higher return than our target of 4.5% this year, we will be more active and aggressive in investing than before," it said. "In terms of investment size, we will seriously look for an investment worth around 100 billion won, up from our previous ticket size of 40 to 60 billion won." 

MMAA allocated 2.1 trillion won to new investments this year, breaking down into 1 trillion won each for alternatives and real estate, as well as 100 billion won for fixed income. That compared with last year's 2.6 trillion won and the average of 1 trillion-1.5 trillion won it had earmarked for new investments annually in the past.

Last year, it earned a net profit of 150.3 billion won ($133 million), its largest-ever annual earnings since the 2008 global financial crisis. The military fund attributed the substantial results to investment gains and the disposal of underperforming business operations made over the past three years.

The net profit was calculated by deducting the principal and interest paid back to its subscribers from 2020 earnings of 410.5 billion and marks a year-on-year increase of 51.6 billion won. 

The profits boosted its capital surplus booked on the balance sheet to 738.2 billion won, up 274.6 billion won on the year. Its reserve ratio, or the reserve amount set aside against future payouts, came to 108.5%, up 2.7 percentage points year-on-year.

Its assets swelled to 12.7 trillion won as of the end of 2020, up 1.1 trillion won on the year. Investment returns averaged 6.4%, versus 7.8% a year earlier.

The MMAA has kicked off the process to find a successor of its financial division chief Kim Jae-dong, whose extended four-year term is expiring this month.

Write to Jung-hwan Hwang at jung@hankyung.com
Yeonhee Kim edited this article.