Administrative Mutual Aid Association Fund Surpasses 27 Trillion Won... "Early Achievement of This Year's Goal"

Surpassing 10 Trillion in 2017, Increasing by Trillions Annually
"High Alternative Investment Proportion... Leading to Excess Returns"

The Administrative Mutual Aid Association's managed assets have surpassed 27 trillion won ahead of its 50th anniversary. A higher proportion of alternative investments compared to other institutions and a volatility minimization strategy are cited as the reasons for the rapid asset growth and consistent excess returns.

According to the Administrative Mutual Aid Association on the 21st, as of the end of last month, managed assets exceeded 27 trillion won. This performance surpasses the initial target of achieving 26.3098 trillion won by the end of this year.

An official from the Administrative Mutual Aid Association stated, "It took 42 years from its start in 1975 with assets of 1.23 billion won to surpass 10 trillion won in assets in 2017. During this period, there were many instances of negative operating returns." He added, "It then took only 5 years to reach 20 trillion won, and this year marks the ninth consecutive year of net profit. The number of members has steadily increased from 79,000 at inception to over 352,000 last year."

The Administrative Mutual Aid Association sets new annual targets based on a mid- to long-term asset allocation plan. This year, the target allocation was set as follows: ▲ Real assets 32.5% ▲ Private credit (loan assets) 25.1% ▲ Private equity (unlisted stocks) 11% ▲ Bonds 9.6% ▲ Stocks 8.1% ▲ Operating assets 7.3% ▲ Opportunity assets 3.9% ▲ Hedge funds 2.5%. Accordingly, the portfolio as of the first half of the year was composed in the order of ▲ Real assets 31.9% ▲ Private credit 25.6% ▲ Private equity 10.0% ▲ Stocks 9.2% ▲ Bonds 8.6%.

High returns have also continued. The Administrative Mutual Aid Association’s asset management return over the past 10 years was recorded at 6.6%. During the same period, the National Pension Service’s return was 5.8%. Heo Jang, Chief Investment Officer (CIO) of the Administrative Mutual Aid Association, said at the POBA Money Show held recently in Busan, "Looking at the trend of operating returns over the past 10 years, pension funds experienced significant volatility depending on stock returns. In contrast, the Administrative Mutual Aid Association had relatively low volatility. Notably, while the KOSPI index fell 25% in 2022, the Administrative Mutual Aid Association’s return rose by 3.8%."

The key to this performance is cited as "active alternative investment." Alternative investments excluding bonds and stocks account for more than 80% of the Administrative Mutual Aid Association’s total investments. This proportion has expanded annually from about 54% in 2017. This contrasts with pension funds such as the National Pension Service, Government Employees Pension, and Private School Teachers Pension, which recorded alternative investment proportions around 16-25%.

CIO Heo said, "Unlike pension funds, the Administrative Mutual Aid Association allows mid-term enrollment and withdrawal. Therefore, it must increase subscribers by protecting principal and interest while achieving high investment returns." He added, "It is a difficult goal to achieve relatively high performance in both the short and long term while maintaining low volatility. This cannot be achieved by investing only in general stocks and bonds. The reason for including alternative investments is to diversify investment targets much more broadly."

The Administrative Mutual Aid Association is expected to exceed its management plan targets again this year. Of the management revenue target of 1.3503 trillion won, 897.5 billion won has already been secured in the first half, achieving a 66.5% attainment rate. Early achievement of the overall management revenue target is expected by the end of this month. The attainment rates by asset class in the first half were highest in hedge funds at 97.7%, opportunity assets at 85.4%, stocks at 84.9%, and private credit at 76.0%, respectively.