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[Interview] Pension funds

KFCC to increase alternative assets to 40% in three years

The bank is interested in toll roads, warehouses, data centers and wind energy in North America and Europe

By Dec 28, 2021 (Gmt+09:00)

KFCC's CIO Park Cheon-seok (Courtesy of Huh Moon-chan)
KFCC's CIO Park Cheon-seok (Courtesy of Huh Moon-chan)

MG Korean Federation of Community Credit Cooperatives (KFCC) will gradually increase its alternative investment proportion from the current early 30% level to more than 40% in three years, said Park Cheon-seok, chief investment officer of KFCC, in an interview with The Korea Economic Daily’s capital market news outlet Market Insight on Dec. 27. 

KFCC is a community bank operating savings and insurance arms, with 73 trillion won ($61.5 billion) in assets under management as of end-November 2021. Although the bank doesn’t disclose details on its asset allocation, it invests mainly in low-risk assets such as domestic bonds while targeting a mid-3% internal rate of return.  

KFCC allocates about half of its alternative assets overseas, focusing more on private equity and corporate finance than real estate. “We have set a plan to make new overseas investments worth 7 trillion won between 2021 and 2022 – we injected 4 trillion won this year and will invest the remaining 3 trillion won next year,” said Park. The bank is interested in infrastructure, including toll roads, warehouses, data centers and wind power in North America and Europe, he added.

Park said KFCC will increase its stock investment, of which it has an extremely low proportion in its portfolio, by more than two times. While increasing the stock investment, it will maintain the current 50:50 ratio of domestic and overseas stocks. KFCC is also creating its own currency hedging system and recruiting professionals for its first direct investment in overseas stocks. Currently, the bank’s overseas stock investment is overseen by five asset managers.

KFCC will also make its first investment in startups next year. “We are planning to invest about 300 billion to 500 billion won in startups through venture capital firms. We are also considering to found joint ventures with global VC firms in case of overseas venture investments,” Park said.   

It will continue to hire small and mid-sized asset management firms to provide it with various co-investment opportunities. With an aim to grow together with the smaller asset managers, it will accelerate the securing of more fund investment managers, Park added.

Write to Jae-fu Kim and Jongwoo Kim at hu@hankyung.com

Jihyun Kim edited this article.
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