Korea's MMAA eying best income plans to up investment in overseas stocks

[Photo by Lee Seung-hwan]

Military Mutual Aid Association (MMAA), one of major public funds in South Korea with 12.7 trillion won assets under management and eying earnings this year, plans to up share in overseas stocks to 50 percent in its investment portfolio and increase investment in environmental-friendly, future mobility and bio assets, according to tis chief investment officer (CIO).

The association’s strategy centers on “cross-region and market-oriented” investment, CIO Lee Sang-hee told the Mail Business Newspaper in an interview.

The fund will increase the share of foreign stocks from the current 42 percent to 50 percent and expand investment in exchange-traded funds (ETFs) and ETF-managed portfolio (EMP) funds to enhance safety.

For the alternative investments, it will focus on income-producing assets in the short term but keep a close eye on promising sectors including environment-friendly business, future mobility and bio industries.

Infrastructure assets in South Korea and the United States that generate stable and long-term cash flow are the best investment option as the imminent tapering in the U.S. would render many cash-strapped companies economically unviable, he said.

Lee has been spearheading investment at the fund since May this year on a three-year term. He worked as a leader of Samsung Life Insurance’s strategic investment team, stock investment team and New York subsidiary before moving to Lotte Non-Life Insurance to oversight overall asset management business.

He is responsible for managing 5.5 trillion won ($4.6 billion) worth assets in bonds, stocks and alternative investments at the association. The MMAA has a total of 12.7 trillion won in assets under management.

The association reaped 150.3 billion won in net income in 2020, the highest since 2008 despite market shocks from Covid-19. Its financial statements have remained in the black for five years in a row since 2016. Its net profit during the first six months of the year reached a 10-year-high at 175.5 billion won.

The strong performance is partly owed to the big gains from successful cashing-out from private equity funds. “A series of successful sales and initial public offerings (IPOs) of big companies including Job Korea, Hybe, Yanolja and Myungshin Industry brought us five to seven times higher returns,” he said.

Aggressive investments with new funds worth 1.54 trillion won via sales of underperforming businesses have also paid off, he said.

The association is expected to achieve the best-ever earnings at the end of this year. “We estimate the stock return would reach 13.2 percent, bond 2.8 percent and alternative and real estate investment 6 percent at the end of this year, which would help us achieve the highest-ever net income of 180 billion won to 210 billion won and surplus operation for six straight years,” he said.

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