Korean teachers' fund reaps best return since 2009

The Korean Teachers' Credit Union (KTCU) achieved its highest investment return in 11 years of 10% in 2020, led by substantial gains from domestic equities and from the divestment of Ellie Mae Inc., a US cloud-based platform provider.

Last year's return marks its strongest annual result since 2009, amounting to 3.3 trillion won ($2.9 billion) in investment gains for the whole year of 2020, the South Korean retirement fund said on Apr. 2.

The 10% showing compares with 2019's return of 6.9% and more than double its 4% target.

Domestic equities returned almost 40%, far outstripping the 6.3% from alternative assets. Domestic and overseas stock portfolios outperformed their benchmarks by 8.9 percentage points and 11.6 percentage points, respectively.

Among alternatives, its $37.6 million bet on Ellie Mae generated a 167% return, or $153.8 million in proceeds, in just one and a half years. The KTCU invested in Ellie Mae through a fund of the US-based Thoma Bravo, which sold the US software company to the global securities exchange operator Intercontinental Exchange (ICE) for $11 billion last year.

Overall, the $30 billion fund for South Korean teachers and school employees posted its largest-ever net profit of 952.7 billion won ($844 million) last year, more than double the previous year's 456.5 billion won.

This year, the KTCU is targeting a 4.3% return on investment, compared with its five-year average of 6.7%, with overseas assets accounting for 53.3%.

Its assets under management reached 36.7 trillion won as of the end of last year. Its reserve ratio, or the amount of reserves set aside against future payouts, rose to 105.8%, up 3.4 percentage points on the year.

In comparison, the Military Mutual Aid Association reported its largest-ever net profit since the 2008 global financial crisis of 150.3 billion won, while its investment return dipped to 6.4% from 7.8% a year earlier.  

Last month, the KTCU made its first commitment to a blind pool fund of San Francisco-based private equity firm Hellman & Friedman (H&F), ponying up $100 million to its 10th blind pool fund, which targets $22 billion at its final close.

Earlier this year, the teachers' fund participated in KKR’s $1.7 billion Asia real estate fund for opportunistic investments with a commitment of $50 million.

Write to Jun-ho Cha at chacha@hankyung.com
Yeonhee Kim edited this article.