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Teachers' Pension CIO Lee Kyu-hong during an interview in November 2021
Teachers’ Pension in Korea has said the rate of return from its investment management in 2021 reached 12%, the highest ever since its inception in 1974. The return amounted to 2.4 trillion won ($2.1 billion), a record-high as well. The record-breaking return was thanks to the bull market of overseas stocks and increased value of alternative assets, the South Korean retirement fund for private school teachers and employees stated on Feb. 4. Overseas alternative assets and overseas equities respectively achieved 34.3% and 27.1% returns. The overseas investments were mainly in the US and other developed countries, the pension fund said. Domestic alternative assets and overseas bonds earned 15.8% and 7.9% returns, respectively. Domestic equities gained a 5.7% return, which surpassed the benchmark. Domestic bonds had a negative 1.2% return due to the interest rate hike aftermath. The pension fund gained a 4.1% return from direct investments in domestic equities, lower than indirect investments through asset management firms.The pension fund’s assets under management reached 23.5 trillion won ($19.6 billion) in the end-2021, 2.6 trillion up from 20.9 trillion won by the end-2020. The yearly rate of return has been over 11% for the past three years in a row.“Our fund was estimated to dry up in 2049, according to the financial research in 2020. However, it has been delayed for three years to 2052 thanks to the double-digit return rates for three consecutive years”, an official from Teachers’ Pension said. The retirement fund will expand overseas and alternative investments, the official added. Its total assets amounted to 26.7 trillion won in the end-2021, 2.8 trillion from the end-2020. The AUM makes up 88.1% of the total assets. Equities account for 42.5%, or 10 trillion won, while bonds make up 34.8% or 8.2 trillion won. Alternative assets reach 21.3% or 5 trillion won. Cashable assets take 1.5% or 348.8 billion won.Regarding overseas alternative assets, the CIO said the US will account for 60% of the pension fund's new overseas alternative investments. "There will be plenty of investment opportunities in the infrastructure and real estate sectors in the US and other developed countries," he said in an interview with The Korea Economic Daily last November.It is aiming to increase the overseas alternative asset proportion to 21% of its AUM by end-2025, Lee said at the time.By Jae-fu Kimhu@hankyung.comJihyun Kim edited this article.
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