246 Billion Won Gain from Overseas Investment in 4 Years: KTCU's Investment Secrets as a Mutual Aid Role Model [Inside Pensions and Mutual Aid] ③

KRW 13.99 Billion Investment Grows to KRW 37.79 Billion
Internal Promotion and 3-Tier Deliberation: Strong Independence
18.4% Annualized Return... Expanding Overseas Portfolio

Editor's NotePension funds and mutual aid associations have long established themselves as key players in the capital markets. Beyond their core differences—pension funds secure retirement for the public, while mutual aid associations focus on growing assets and expanding welfare for their members—they also differ clearly in terms of asset scale, investment strategy, and organizational structure. This in-depth analysis will examine pension funds and mutual aid associations, which also serve as vital sources of funds for major institutional investors both at home and abroad.

On January 7, Constellation Energy, the largest nuclear power generation company in the United States, acquired Calpine, a gas-fired and geothermal power producer, for $16.4 billion (about 23 trillion won). This was a strategic bet to secure electricity for artificial intelligence (AI) data centers in advance. The seller was U.S. investment company ECP—and the entity that made 2.7 times its principal from this deal was based in Seoul.

It was the Korea Teachers’ Credit Union. The money invested into Calpine was 139.9 billion won, and the returned amount was 377.9 billion won—meaning a profit of 246 billion won and an investment return of 170%. This came four years after the institution indirectly acquired equity by investing in an ECP continuation fund in 2022. By July of this year, the Korea Teachers’ Credit Union had collected a total of 158.3 billion won in principal and distribution. By the liquidation date, December 2027, an additional 160.3 billion won is expected to return.

The Korea Teachers’ Credit Union executes most of its overseas alternative investments through blind funds managed by private equity fund (PEF) operators. It takes a co-investment approach for high-quality products. Direct investments are avoided to prevent local response issues when problems arise. The so-called “Calpine windfall” was less a matter of luck and more a result of a pre-designed strategy and investment structure.

Mutual aid associations must invest the membership dues they collect to pay the promised interest (crediting rate). Their “strength” comes from generating higher investment returns than the crediting rate. This enables them both to cushion declines in yields and to increase the interest to be distributed to members. The secret to the Korea Teachers’ Credit Union—a frequent “role model” for mutual aid associations for achieving returns over 10% for two consecutive years—lies in its systems for internal control and investment decision-making.

Triple-Stage Investment Review, Veteran CIO... The Power of Systems

The core is a structure that prevents an external chairman from making investment decisions unilaterally. Any new alternative investment goes through three review stages: the Investment Working Council, the Investment Review Committee, and the Executives’ Council. Before this, the asset management department examines the investment proposal, and the investment screening team conducts the first risk assessment.

The Working Council is composed of members from the relevant asset management department, fund management strategy team, and risk management staff, scoring each item—such as profitability and risk—on a five-point scale. According to regulations, if the overall average score exceeds 3 points and the average for each item exceeds 2, the proposal is submitted to the Investment Review Committee. However, most ratings are in the mid-4 range. If only in the 3-point range, further review is conducted. Each staff member’s individual scores are aggregated, meaning individual lobbying or pressure cannot influence the process, according to the Korea Teachers’ Credit Union. The Investment Review Committee consists of three internal and four external members; external members are chosen from a pool of up to six legal experts, six accounting experts, and up to thirty alternative investment professionals.

A system is only as robust as those who maintain it. The Korea Teachers’ Credit Union has traditionally promoted internal candidates with ample fund management experience as Chief Investment Officer (CIO). This ensures continuity of management philosophy and operations. The current Fund Management Director, Jae-taek Ko, is a prime example. Joining in 1994, he has served as head of the Equity Investment Team in Financial Investment, head of the Alternative Investment 2 Team, head of Corporate Finance, and director of Fund Management Strategy before his appointment in January last year. With 31 years at the organization and experience across equity, alternatives, and corporate finance, this veteran insider oversees nearly 90 trillion won in assets.

An official from the Korea Teachers’ Credit Union said, "Because our mutual aid association's assets are so large, switching portfolio direction is virtually impossible. That is why it’s much more effective for internal personnel to take over previous directors’ investment decisions, both for understanding the current situation and for speed in decision-making."

Annualized Return 18.4%... Less Real Estate, More Infrastructure

As of the end of June of this year, the annualized return stands at 18.4%. This is more than four times the target return of 4.5%. Double-digit returns are nothing new; since 2020, with the exception of two years, annual returns have always exceeded 10%. Last year’s return was 10.6%—the highest among mutual aid associations. Thanks to strong domestic and overseas stock markets, 38% of returns came from equities. Corporate investments contributed 5.6%, and alternative investments accounted for 5.4%.

However, these figures are as of the end of June. Since July, the sharp drop in the domestic stock market has significantly reduced the Korea National Pension Service's valuation, due to its higher allocation to local stocks. The Korea Teachers’ Credit Union holds 18.3% in equities and 64.1% in alternatives. Differences in asset allocation have thus led to equally different results in identical market conditions.

Of the 46.7896 trillion won invested in alternatives, corporate finance accounts for 25.3%, real estate 21.3%, and infrastructure 17.5%. This is a strategy to buffer the volatility of equities. Adjustments have also been made recently, depending on market conditions. While maintaining senior loans within real estate equity, the share of overseas infrastructure has increased as much as possible. Given the long-term nature of capital, assets that continuously yield profit—even if less liquid—are preferable. Bond allocation has also been raised slightly, focusing on government bonds in line with rising interest rates. In fact, compared to last year, real estate’s share dropped from 22% to 21.3%, infrastructure rose from 17% to 17.5%, and bonds increased from 17% to 17.6%.

Over 60% Overseas—Preparing a Base in New York

The larger the assets, the broader the view in searching for investment targets. This is because growth in the local market cannot keep up with the asset growth rate. Overseas assets comprised 55.3% in 2022, 56.1% in 2023, and 58.2% in 2024, passing the 60% mark in the second quarter of this year.

Plans to establish a local office in New York are part of this expansion. The aim is to upgrade the North American investment platform, broaden touchpoints with global asset managers (GPs), investment banks, and developers, and strengthen both co-investment and deal sourcing. An official from the Korea Teachers’ Credit Union explained, "Staff for the office have been confirmed; it only remains for office space to be secured. Once this is done, the office will open." The institution thus aims to transition from simply being a limited partner (LP) to an “active LP” that directly uncovers opportunities on the ground.

In terms of scale, it is already the largest mutual aid association. As of the first quarter this year, assets under management totaled 89.2756 trillion won, trailing only the National Pension Service even when including pension funds. Over the past five years, the average annual asset growth rate was 13.4%. Its membership totaled 946,307, placing it second after the 1.85 million members of the Yellow Umbrella Mutual Aid Fund. The medium-to-long-term strategic plan set in 2020 targeted assets of 57 trillion won and membership of 940,000—targets which have been surpassed by approximately 57% and 7%, respectively.

The benefits offered under “The-K” brand—including hotels, resorts, funeral services, and golf courses—further enhance its appeal. As returns from investments are passed on to members, word of mouth attracts more members, who then pay in more dues, creating a virtuous cycle. Operating in the black for 12 consecutive years up until last year, its reserves-to-liabilities ratio—a measure of assets held versus obligations—was 110.8% in 2023, 113.9% in 2024, and 117.2% last year, showing steady improvement.

This content was produced with the assistance of AI translation services.