Military fund steps up premium asset investment in developed countries

The Military Mutual Aid Association (MMAA) of South Korea will focus on portfolio diversification this year while increasing investment in growth sectors like electric vehicle batteries, its Chief Investment Officer Lee Sang-hee said in an LP panel session at ASK 2022 last Wednesday. ASK is The Korea Economic Daily's biannual forum on global alternative investment.

The retirement fund for Korean military service members is intensifying investment strategies for developed countries, as well as expanding environmental, social and governance (ESG) investments, Lee added. This is in line with what he told The Korea Economic Daily in September 2021, four months after his inauguration.

MMAA is managing 9.7 trillion won ($7.7 billion) in assets, including 7 trillion won in alternative investments. Overseas private equity and debt respectively make up 4.9% and 9% of the alternative assets, while global real estate and infrastructure each account for 10%. The ticket size per fund is around 40 billion won.    

Some major central banks are accelerating tightening policies faster than global economic recovery, which is the greatest risk for the retirement fund’s overseas investment, Lee said. The fund will strengthen investment in developed countries-based premium assets with steady cash flow, while taking a more conservative stance on risk-return profile management, he added.

On the other hand, the retirement fund is considering taking a selective approach to distressed and special situation strategies with GPs who have proven track records.

In his interview last September, Lee said the retirement fund will raise the proportion of alternative investments from the current 70% to 75% of AUM by 2025. At that time he said MMAA is chasing medium-risk, medium-return assets in developed markets with a focus on logistics centers, multifamily property and satellite-related businesses.

During the LP panel session last week, he said the fund hasn't made a major change in the alternative investment plans since the last interview but has been more conservative on reviewing risk-return profiles when making decisions for new investments.

Write to Si-Eun Park at seeker@hankyung.com
Jihyun Kim edited this article.