Korea's National Credit Union Federation may double equity investment

Jul 29, 2010

The institution, with $37 billion in assets, wants to boost its annual return from 6% to 7%.

The National Credit Union Federation of Korea (NACUFOK) is planning to increase its investment in equities with the aim of boosting returns, says Lee Chan-woo, chief executive of the business operating division.

Lee handles around $10 billion of the institution's $37 billion of assets and aims to increase the equity investment proportion from 5% to as much as 10% of the total portfolio.

The portfolio is mostly invested in fixed-income assets (75%), with a further 20% in alternative investments, both domestic and overseas.

Lee, former chief investment officer at the Korea Teachers Pension Fund (KTPF), wants to see a 7% return from the portfolio, with the alternative investments providing 8% performance. Annualised performance for the past three years has been around 6%.

He is particularly interested in Asian equity and fixed-income investments, and is also keen on absolute-return hedge funds.

Around 10% of NACUFOK's existing assets under management (AUM) are in overseas investments, while it has $250 million in real-estate assets, of which 40% is invested locally and 60% overseas. One of the institution's notable foreign investments was last year's acquisition of the Manhattan Tower building in New York, a consortium deal involving other Korean institutional investors.

Lee says that this particular property-investment project has lived up to NACUFOK's expectations in terms of returns, so it is looking for similar overseas deals.

The organisation also invested in the Term Asset-Backed Securities Loan Facility created by the US Federal Reserve in November 2008 after the collapse of Lehman Brothers, and Lee says he is pleased with the returns.

NACUFOK is one of four major non-bank depository institutions in Korea. Similar local institutions include the National Agricultural Cooperative Federation, Korean Federation of Community Credit Cooperatives and National Federation of Fisheries Cooperatives.

NACUFOK's AUM passed $25 billion in 2008 and its current $37 billion portfolio includes $1.5 billion from its mutual insurance business.

There are now 994 credit unions across the Korean peninsula, with more than 5 million members. It has become the third largest network of members affiliated to the World Council of Credit Unions.