KTCU values working-level opinions for alternative investment

“The South Korean stock markets have barely risen since early this year, while the markets in Japan and Taiwan are hitting highs. I believe Korea undervalues its own stock markets and thus creates more discounted stocks. There is huge room for the domestic markets to soar.”

So said Korean Teachers’ Credit Union (KTCU) Chief Investment Officer Kim Ho-hyun in a recent interview with The Korea Economic Daily, adding that the government should introduce the Morgan Stanley Capital International (MSCI) World index to Korea, which would lead to a rise in the stock markets. Kim said there is great potential for increased Korean stock values if the country can break out of the emerging market list, he added.

KTCU allocates 8.6 trillion won ($7.2 billion), or 21.1 % of its 41 trillion won in assets under management for stocks. While investing 4.9 trillion won and 3.7 trillion won in domestic and overseas stocks, respectively, the pension fund plans to gradually increase investment in both these areas. KTCU aims to earn a 20% return on overseas stocks this year, Kim said.

In terms of alternative investment, the pension fund has seen a 12.8% return as of the third quarter and will maintain the current 58% proportion next year. KTCU in October saw a 22.1% internal return rate by selling a GS Retail logistics center in Dohwa-dong, Incheon, for 51.1 billion won, in which it invested 20.6 billion won in 2016. The CIO said KTCU expects to gain more than 100 billion won from the sale of the Alpharium Tower office building, a landmark in Pangyo, known as Korea’s Silicon Valley, in 2022. For overseas real estate, it is considering an investment in commercial office space in New York.  

Kim added KTCU sees semiconductors and data centers as very promising in the long term as the global companies will increase investments in autonomous vehicles and digital platforms such as the metaverse. 

In the corporate finance sector, KTCU realized a 74.2 billion won gain by selling part of its stake in K-pop group BTS’ music label HYBE Co., in which the pension fund invested 17.3 billion won in 2018. It also will increase investment in venture capital blind funds next year, up from its 150 billion won investment in 2019.

For environmental, social and governance investment, the pension fund will gradually increase investment in the sector in line with global trends, the CIO said. KTCU has invested a total of 749 billion won in the ESG sector, including 263 billion won in socially responsible stock investment, 220 billion won in ESG bonds and 266 billion won in eco-friendly alternative investment.

“One of our main investment principles is a ‘bottom-up’ strategy, which values working-level opinions for decision-making,” Kim said. “The strategy motivates asset managers to actively find great investment targets, especially in alternative investment.”

Write to Kim Jong-woo and Kim Jae-fu at jongwoo@hankyung.com
Jihyun Kim edited this article.