Korean army fund invests in Macquarie European fund

The $8bn Military Mutual Aid Association looks to increase allocation in overseas infrastructure from the current three percent to five percent.

The Military Mutual Aid Association (MMAA) of South Korea, one of the largest institutional investors in the country, will invest €40 million in the Macquarie European Infrastructure Fund 5 (MEIF5). 

The Australian manager’s latest vehicle, targeting to raise €2.5 billion, will be deployed in core infrastructure assets across utilities, communication and transport sectors. The target assets would have high regulatory barriers and are being operated under long-term contracts, MMAA’s head of alternative investment division Kim Jin-woo told an online press source. He added that its investment in the fund has been currency hedged. 

In addition to the investment pipeline supported by privatisation plans, renewable energy-supporting policies and the Juncker Plan, the good performance of the predecessor MEIF4, which delivered a 15 percent return a year, was one of the reasons behind the investment decision, according to local reports.   

Macquarie declined to comment on MMAA’s investment. 

The military savings fund, with $8 billion of assets under management, is looking to increase its overseas alternative investment to five percent from the current three percent. In May, the savings fund decided to invest KRW50 billion ($44.7 million; €39.5 million) in a global infrastructure fund managed by Brookfield Asset Management. This marked the first partnership between the MMAA and Brookfield. 

Lee Sang-ho, chief investment officer of the Korean army fund, told local press that foreign asset managers’ interest in Korean institutional investors has notably increased recently, with their requests for meetings getting more frequent. As the returns from real estate investments decline, the fund is gradually reducing its exposure to the real estate asset class from a current 44 percent to 40 percent by 2020, while maintaining the level of its alternative investments in the overall portfolio at 70 percent.