The Korean Teachers’ Credit Union (KTCU) plans to expand its $7 billion overseas investment allocation by around 10%, or $750 million, this year. Of that, $425 million is set to go into offshore real estate – all via external international asset managers – with a good chunk into global equities.
Chief investment officer Kang Sungseog has told AsianInvestor that KTCU intends to be more proactive in alternative investments, including hedge funds and real assets, in 2017.
The institution will increase its global equity allocation this year by as much as $200 million, he added, but does not intend to make more hedge fund investments in 2017. Meanwhile, Kang (pictured below) said he was open to meeting with global managers with competitive products.
KTCU expects its $27 billion in assets under management to rise to $33 billion by the end of 2020.
Meanwhile, the institution plans to allocate 29.5% of its assets to foreign investments by 2020, up from almost 25% now. Of its total AUM, overseas alternative investments accounted for 15.7%, or $4.2 billion as of Q3 2016, up from 10.1% in 2013.
The fund began investing overseas in 2004. As its asset base has grown, KTCU has followed a path taken by many other Korean institutional investor, looking offshore to diversify its investments and seek higher returns.
The country’s largest institutional investor, the $450 billion National Pension Service, boosted its overseas alternative investments to $29.7 billion last year from $19.8 billion in 2013.
KTCU’s offshore alternative investments are quite diversified, but have a distinct focus on property. The institution said 76% of these investments were invested in real assets, with hedge funds taking up 6%, private equity 5% and other investments, such as private debt, the remaining 13%.
The institution has outsourced some of these investments to external fund managers. A KTCU spokesperson provided AsianInvestor with a list of local and global managers that run its overseas mandates. Domestic firms include Samsung and Mirae Asset, while global alternative managers include BlackStone, Carlyle, Citadel, HarbourVest, Macquarie, Millennium, Neuberger Berman and Pantheon.
Moreover, last month KTCU last month set up an investment joint venture with TH Real Estate, the real estate arm of US fund house TIAA. KTCU has a 49% stake in the JV and TH Real Estate 51%.
A spokesman for KTCU said all the preparatory legal processes for the JV had been approved by the local regulator, the Financial Supervisory Service. The two firms already have a working relationship, having signed an agreement to build a partnership in 2012.
KTCU’s growing asset base and desire to invest more offshore has increasingly attracted the attention of foreign asset managers. In October last year David Rubenstein, chief executive of US-based Carlyle Group, met Moon Yonglin, KTCU's CEO, and Sangseog, according to the Korean fund’s internal news announcements. KTCU has also previously hosted Timothy Geithner, president of Warburg Pincus and former US Treasury secretary, and Damien Frawley, CEO of Australia’s QIC.
KTCU’s first foreign property investment was in 2010 into a 33-floor office building in San Francisco’s Market Street via a consortium, which included the Korean Federation of Community Credit Cooperatives (KFCCC).
KTCU invested $84.9 million in the £333 million deal and earned a $28 million profit on it when the consortium sold the building to US lease company Wealth Lease in December 2012, according to internal news reports.
The fund has had other successes since. After investing $78.8 million into a deal for Chicago’s Loop office tower in 2011, it booked a $23.6 million profit when the asset was sold in October 2014. And it reportedly earned $23 million from a three-year $43.7 million investment into 68 Upper Thames Street in London in July 2015 (again, done alongside KFCCC).