[Institutional Investment Strategy]④Noranwoosan "Opportunities in AA-rated Corporate Bonds, ETFs, and Loan Investments"

As concerns about an economic recession grow due to high interest rates, high exchange rates, and high inflation, investors' worries are deepening. Although the stagnant global stock market seemed to rebound briefly, there are fears that a bigger crisis may be approaching. In such an uncertain market environment, it is not easy to decide the direction by looking at the investment compass alone. Asia Economy listens to the investment strategies of 'big players'?institutional investors who move the market with decades of experience managing large-scale funds, know-how, and strict investment principles. We will preview the investment directions of institutions through this fall, winter, and early next year, helping Asia Economy readers fine-tune their investment steering.

[Asia Economy Reporter Park So-yeon] Lee Do-yoon, Chief Investment Officer (CIO) of Noranwoosan Asset Management Headquarters, has set a second-half operation plan focused on high-quality bonds, ETFs (Exchange-Traded Funds), and loan investments.

On the 30th, Lee said, "As market interest rates have risen sharply, bond assets that greatly exceed the initially planned target returns have expanded," adding, "With AA-rated or higher high-quality corporate bonds maturing in 3 to 5 years, it is possible to secure operating profits that exceed Noranwoosan's overall target return." The Bank of Korea's base rate was raised from 1% per annum at the beginning of this year to 2.5%, pushing government bond yields above 3% and corporate bond yields beyond 4%. This level matches the returns (3-5%) recorded by Noranwoosan over the past three years.

Regarding the stock market, he judged that there was a temporary 'bear market rally' (a technical rebound in a bearish market). Lee stated, "Once again, I felt the high volatility of the stock market," and added, "We are continuing to adjust toward safe sectors within the stock market and increasing the use of ETFs that allow timely responses along with mid- to long-term investments."

In the alternative investment sector, he forecasted a delayed adjustment effect. He said, "After a significant correction in the public market, I expect an adjustment in the private market within 1 to 2 quarters," and added, "We are responding conservatively to alternative investments, focusing more on blind investments rather than projects, and prioritizing loan investments over equity investments."

He predicted that the financial market's focus in the second half of this year will shift from inflation to economic slowdown. Lee explained, "Major investment banks (IBs) continue to downgrade growth forecasts," and said, "Growth rates in major regions such as the global economy, the United States, and the Eurozone have been revised downward for 9 to 10 consecutive months since peaking in October last year."

He continued, "The U.S. Federal Reserve is not stopping tightening, backed by an unemployment rate at full employment levels, and under the name of being 'data-dependent,' it is not revealing where the end of the tightening cycle is," adding that another risk that a recession could bring is the deterioration of the corporate bond issuance environment. He expressed concern, saying, "Credit events may occur in lower credit segments."

Despite the uncertain situation, Noranwoosan continues to review strategic investments and opportunity assets steadily. Lee said, "Noranwoosan has performed well, recording a slight negative return until mid-August this year," adding, "Bonds and alternative assets have shown good performance, and although stock assets are sluggish, we plan to actively increase returns using short-term response tools such as ETFs." In particular, he said, "We plan to expand investments in highly liquid listed alternative assets, as well as multi-asset and hedge fund investments with absolute return characteristics."

Meanwhile, Noranwoosan, which manages the mutual aid business for the Korea Federation of Small and Medium Business (KBIZ), manages assets totaling KRW 17.7442 trillion as of the end of 2021. This includes KRW 9.6769 trillion (54.54%) in bonds, KRW 4.1629 trillion (23.46%) in alternative investments, KRW 3.2373 trillion (18.24%) in stocks, and KRW 667 billion (3.76%) in short-term funds. The operating returns were 3.16% in 2019, 4.94% in 2020, and 4.44% in 2021.

Lee Do-yoon graduated from Yonsei University with a degree in Business Administration and earned a master's degree in Business Administration from Cornell University. He joined Korea Investment Trust in 1990 and built his career as an expert in bond management. From 2005 to 2013, he served as head of the bond management division at Korea Investment Trust Management. Between 2013 and 2015, he was head of the bond management division at Samsung Asset Management, and from 2016, he served as Chief Investment Officer (CIO) of the Police Mutual Aid Association for four years. In 2018, he became the first CIO in the history of the Police Mutual Aid Association to be reappointed. He joined Noranwoosan in June last year.

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