[In-Depth Look at Funds and Mutual Aid Associations]② Overwhelming Proportion of Alternative Investments... The Teachers' Credit Union as the 'Role Model' for Mutual Aid Associations

Leading Infrastructure Investments Including Airport Expressway and Australian Desalination Plant
Achieved Highest Returns Among Mutual Aid Associations Last Year, Driven by Overseas Investments
Simultaneous PE and VC Investments This Year Helped Al

Editor's NotePension funds and mutual aid associations have long established themselves as key players in the capital market. Beyond the fundamental differences-pension funds are for securing citizens' retirement, while mutual aid associations focus on asset growth and welfare expansion for their members-they also show clear distinctions in asset size, investment strategy, and organizational structure. This article provides an in-depth analysis of pension funds and mutual aid associations, which serve as major funding sources for leading institutional investors both domestically and abroad.

Unlike pension funds, mutual aid associations recruit members who join voluntarily by offering extensive welfare benefits and must retain them through higher financial asset returns. The Korean Teachers’ Credit Union stands as the role model among such mutual aid associations.

Robust asset management has been a major driver of growth. The key themes in the Teachers’ Credit Union’s asset management are “alternative” and “overseas” investments. In the 1990s, it invested in the Incheon International Airport Expressway; in the 2000s, an Australian desalination plant; and in the 2010s, office properties in the US and UK as well as mezzanine investments in Celltrion Healthcare. These moves placed it well ahead of other pension funds and mutual aid associations in terms of investment strategy.

Stable Double-Digit Annual Asset Growth

Founded in 1971 with total assets of 1.3 billion won, the Teachers’ Credit Union now holds the largest total assets (74 trillion won) among mutual aid associations. Even when including pension funds, it ranks second only to the National Pension Service. Its membership stands at 920,000, second only to the Yellow Umbrella Mutual Aid Fund, which is primarily composed of self-employed individuals.

Under the brand “The-K,” the Teachers’ Credit Union operates directly managed hotels and a funeral service subsidiary, while also providing members with affordable welfare benefits such as discounts at various partner companies. It also offers long-term savings products with interest rates higher than those of commercial bank deposits.

From 2020 to 2024, the compound annual growth rate (CAGR) of total assets reached 13%, reflecting stable growth. Notably, despite political and economic uncertainties last year, total assets rose to 74.5909 trillion won at year-end, an increase of 16.3% (10.4324 trillion won) from the previous year.

Steady Increase in High-Yield Overseas Investments

In terms of returns, the Teachers’ Credit Union posted the highest yield among mutual aid associations last year at 10.7%, more than double its target return of 4.5%. This was largely due to a 30.9% return in overseas equities, driven by rising share prices of global artificial intelligence (AI) companies. Overseas alternative finance (corporate finance) yielded 19.9%, and overseas infrastructure 18.7%. In contrast, all domestic asset returns remained in the single digits.

The Teachers’ Credit Union has steadily increased its proportion of overseas asset investments each year: 55.3% in 2022, 56.1% in 2023, and 58.2% in 2024. There is particular interest in sectors expected to experience structural growth, such as data centers and logistics.

Jung Gap-yoon, Chairman of the Teachers’ Credit Union, stated, “Amid ongoing high volatility worldwide, a diversified portfolio focused on advanced economies has greatly contributed to the union’s stable performance. Maintaining an appropriate proportion of volatile equities and expanding alternative investments in place of bonds have also proven effective.” The Teachers’ Credit Union is preparing to open an office in New York, USA by July next year to further strengthen its overseas investment expertise.

Two-Thirds of Managed Assets in Alternative Investments

One key difference between mutual aid associations and pension funds is the relatively higher proportion of alternative investments. The Teachers’ Credit Union’s alternative investment ratio stands at 66.8%, the highest among both pension funds and mutual aid associations. Of the approximately 43 trillion won in alternative investments last year, corporate finance accounted for 25.9%, real estate for 24.4%, and infrastructure for 16.5%.

The Teachers’ Credit Union has contributed to the growth of the domestic capital market through continuous investments in private equity funds (PEFs) and venture capital (VC). Notably, during the first half of this year, when other pension funds and mutual aid associations hesitated to launch new investment initiatives due to the Homeplus incident and the impact of US tariffs, the Teachers’ Credit Union’s proactive announcement of new investments provided much-needed relief to the PE and VC industries. In March, the union announced plans to invest 700 billion won in 10 PEFs, and in May, 152 billion won in 10 VCs.

The union’s aggressive alternative investments have, at times, led to misunderstandings. A notable example is the selection of a blind fund manager to acquire five golf courses nationwide in August. The Teachers’ Credit Union will invest a total of 1 trillion won over the next five years, including a full 500 billion won fund commitment and a 500 billion won loan at a 50% loan-to-value (LTV) ratio. During last month’s National Assembly audit, criticism arose: “When only 3% of all members use existing golf courses, why acquire more?”

'Systematic Management' as the Greatest Strength

Compared to stocks and bonds, which have abundant information both domestically and internationally, alternative investments are more challenging to manage in terms of risk. The Teachers’ Credit Union operates a systematic risk management framework centered on a Risk Management Committee composed of three internal and five external members. The Risk Management Office works closely with the Strategic Planning Office, Compliance Office, and Information Security Office.

The union’s asset management is also distinguished by its “systematic management” approach. Unlike other pension funds and mutual aid associations that hire externally, the Teachers’ Credit Union has a tradition of promoting internal candidates with extensive fund management experience to the Chief Investment Officer (CIO) position. Ko Jae-taek, who was appointed CIO in January this year, joined in 1994 and has served as Head of Equity Investments, Head of Alternative Investments 2, Head of Corporate Finance, and Head of Fund Management Strategy.

With stable and systematic management capabilities, the Teachers’ Credit Union has maintained a surplus for 11 consecutive years as of last year. Its reserve ratio has also steadily increased: 109.2% in 2022, 110.8% in 2023, and 113.9% last year.

Recently, the Teachers’ Credit Union has been pursuing comprehensive innovation in areas such as improving returns, expanding alternative investments, advancing risk management, professionalizing its asset management organization, and strengthening ESG (environmental, social, and governance) policies. It is evaluated as a stable management institution that is enhancing its competitiveness by balancing asset stability, profitability, and social responsibility.