[Institutional Investment Strategy] ⑤ Gyoyukwon Gongjehoe, Flexible Response... Expansion of Alternative Assets in the US and Europe

As concerns about 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 greater crisis may be approaching. In 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] The Korea Teachers' Pension (KTP), managing approximately 56 trillion KRW in funds, is setting a flexible investment strategy to respond to the high volatility of the market in the second half of this year.

According to the investment banking (IB) industry on the 13th, KTP plans to implement a flexible management strategy that involves making low-cost staggered purchases if the financial market significantly underperforms appropriate valuations in the second half of the year and realizing profits during rapid rebounds.

KTP forecasted that economic sluggishness would continue in the second half of the year amid persistent inflation, the Ukraine crisis, and China's lockdown measures. In particular, due to the complex and uncertain situation, including major countries' interest rate hikes and concerns about economic recession caused by reduced gas supply in Europe, investment sentiment is expected to weaken for the time being.

The financial market in the second half is expected to continue experiencing volatility due to the sluggish global economy and concerns over the sustained tightening stance of major central banks. However, since the global financial markets underwent significant price adjustments in the first half, it is evaluated that the upcoming interest rate hikes and recession possibilities in major countries have been somewhat pre-reflected. Therefore, the possibility of a sharp additional adjustment in the financial market is considered low.

Park Man-su, Chief Fund Manager at KTP, diagnosed, "Interest rates and inflation have already been reflected in stock prices ahead of time." Accordingly, KTP plans to proceed with low-cost staggered purchases and make proactive investments in core assets in cooperation with overseas pension funds. He said, "It is important to defend optimally now and generate greater profits when opportunities arise," adding, "Leading investments and investments in core assets are necessary to increase returns."

KTP plans to increase alternative investments in advanced countries such as the United States and Europe. To this end, it recently signed a business agreement with the California State Teachers' Retirement System (CalSTRS), one of the largest pension funds in the U.S. The two institutions established a joint venture (JV) worth approximately 610 billion KRW for joint investment in U.S. mule facilities. Additionally, in the European market, KTP plans to increase investments in stable infrastructure assets guaranteed by the government. Park explained, "Investments in Europe are managed through a rational system, so there is no disruption caused by external factors such as regime changes," adding, "We plan to further increase investments that can generate stable returns of about 6-7% through social infrastructure such as schools, prisons, hospitals, and transmission lines."

In the future, KTP plans to promote specialization of management personnel and refinement of portfolios in overall fund management. Park said, "While it is good for juniors to gain experience by moving through various fields, we are also considering ways to cultivate specialized personnel in one field by benchmarking overseas pension funds," adding, "Currently, the managed assets are about 56 trillion KRW, but soon it will grow to around 100 trillion KRW, so it is time to reorganize the portfolio with a tailored approach suitable for the nature and scale of our pension fund, rather than off-the-rack solutions."

Meanwhile, as of the end of the first half of this year, KTP's total asset size is 56.5 trillion KRW. The portfolio consists of 11.6% domestic stocks, 9.7% overseas stocks, 11% domestic bonds, 8% overseas bonds, 10.7% domestic corporate finance, 11.8% overseas corporate finance, 14.6% domestic alternative investments, and 22.6% overseas alternative investments.

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