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[CIO interview] Pension funds

Korean military fund targets medium-risk global assets

MMAA to focus on developed markets, setting sights on warehouses, residential property and satellites

By Sep 27, 2021 (Gmt+09:00)

Military Mutual Aid Association CIO Lee Sang-hee
Military Mutual Aid Association CIO Lee Sang-hee

The Military Mutual Aid Association (MMAA), a South Korean retirement fund, is chasing medium-risk, medium-return assets in developed markets with a focus on logistics centers, multifamily property and satellite-related businesses, its chief investment officer said.

The $11 billion fund for military service members plans to boost overseas investments to half of its assets under management from the current 42%, in pursuit of high single-digit returns.

"To do so, we will work with global asset management firms, including Baillie Gifford in the UK," MMAA's CIO Lee Sang-hee told Market Insight, the capital news outlet of The Korea Economic Daily, on Sept. 27.

Baillie Gifford is an Edinburgh-based investment firm. MMAA had invested in a technology fund managed by the Scottish asset manager, which reportedly generated impressive double-digit returns last year.

"Over the medium to long term, we will expand alternative investments for medium-risk, medium-return, which are expected to generate high single-digit returns on a steady basis," Lee said in an interview.

This year, MMAA targets a 4.5% return on investments on average, versus last year's 6.4%.

By asset type, MMAA set its sights on logistics centers and multifamily rental properties, which show little correlation to economic cycles. It is also interested in satellites and the related space businesses in line with the fast-growing space industry.

This year, it will likely have invested an additional 2 trillion won ($1.7 billion) in alternative assets by year's end.

By region, the military fund will center on North America and Europe in search of steady returns, although they may produce slightly lower expected returns than emerging markets'.

"We will not make bets on emerging markets, only because they may yield an additional 1-2% return," Lee said.

MMAA has 12.7 trillion won ($11 billion) in assets as of end-2020, of which 8.5 trillion won has been put into investment assets. Alternatives make up 70% of the investments, reflecting its active real estate business to build and operate apartments for military families.

During a panel discussion of the ASK Conference 2021 hosted by The Korea Economic Daily on May 12, senior investment managers of the MMAA, the Government Employees Pension Service and the Public Officials Benefit Association all picked logistics and data centers and residential properties as their preferred asset classes.

MMAA CIO Lee Sang-hee
MMAA CIO Lee Sang-hee

Lee, a former chief investment officer of Lotte Non-Life Insurance Co., was installed as the military fund's CIO in May of this year. He had led Lotte Non-Life's investment operations between late 2014 and early 2021, after serving as the insurance firm's New York investment unit head.


From domestic private equity and venture capital investments, the military fund recently reaped five to sevenfold returns. The investments include HYBE Co., the label behind K-pop sensation BTS, South Korea's largest travel platform Yanolja and the country's top recruiment portal JobKorea.

MMAA had mandated five domestic PEFs and three Korean venture capital firms to invest a combined 120 billion to 130 billion won in 2019 and 2020, respectively.

Lee said it will allocate a similar amount to Korean PEFs and VC firms this year.

Seoul-based SkyLake Investment was among the PE firms picked by MMAA in 2019. It had exited part of its investments in Yanolja by selling them to Singapore's GIC and SoftBank's Vision Fund between 2019 and 2020.

"To achieve higher returns, it is important to continue to spread money, even a small amount, across promising assets such as Yanolja and HYBE, which will likely hit the jackpot in the next few years," Lee said.

MMAA's Recent Exits from Alternative Investments via Blind Pool Funds 

Company  Exit method
HYBE IPO in October 2020
JobKorea Sale to Affinity Equity partners
Yanolja Secondary share sales to GIC, Vision Fund
Myoung Shin Industry IPO in December 2020
Source: MMAA

To prepare for rising rates, MMAA will invest in equity-traded funds (ETFs) and building an ETF-managed portfolio, as well as investing in listed real estate investment trusts to earn stable dividend income, the CIO added.

Regarding environmental, social and governance (ESG)-themed investments, it has adopted negative screening to exclude cigarette and liquor companies from its equities portfolio. For the outsourced assets, it has been investing in domestic ESG funds and overseas activist funds.

Last year, MMAA earned a net profit of about 150 billion won, marking its best annual result since the 2007-08 global financial crisis. Its 2021 net profit is expected to rise to 180 billion to 210 billion won in its sixth consecutive year of net profits.

Write to Jong-woo Kim and Jae-fu Kim at

Yeonhee Kim edited this article.

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