[In-Depth Look at Funds and Mutual Aid Associations]⑥ "Alternative Investments, Charge Forward" Military Mutual Aid Association Aiming for 30 Trillion Won in Assets

The Military Mutual Aid Association, a Korean welfare and investment body for servicemembers, is pursuing a strategy of shifting its portfolio further into illiquid alternative assets to fund a guaranteed 4.9% annual retirement benefit rate. According to Asia Business Daily, the association kept that rate unchanged last March, when the Bank of Korea's benchmark rate stood at 2.50%. Its 2025 funding rate was 4.53%, and the publication notes that bond yields over the past four years ranged between 2.1% and 4.3%, making the guaranteed rate difficult to meet through fixed income alone.

To bridge the gap, the association has leaned on alternatives. At the end of last year, 74.8% of managed investment assets were in alternatives and real estate, with a 2030 mid-term target of 84.8%. Private equity and venture capital funds make up 68% of the alternative book, while real estate funds (57%) and project financing loans (28%) form the real estate exposure. The association's growth was driven in part by its lump-sum entrusted savings product, whose balance rose from 3.1091 trillion won in 2022 to 7.2460 trillion won last year. Its rate on that product was cut from 5.0% to 4.5% in May 2025 and to 4.0% in July.

The association reported assets of 24.4635 trillion won, operating profit of 1.0542 trillion won, and net profit of 409.1 billion won after 645.1 billion won in member welfare distributions. Its reserves ratio of 125.5% was the highest among mutual aid organizations. However, the publication highlights that overall investment yield fell from 7.9% to 6.2%, and that the overall investment management yield declined consecutively since 2023. Korea Ratings cited valuation losses in some overseas alternative funds, while equities delivered the strongest return at 16.4%. An analyst at Korea Ratings said the association would likely keep focusing on long-duration assets.

Membership reached a record 240,117, though most new joiners were enlisted soldiers, and the number of long-term retirement benefit contributors fell for a third straight year. The publication also reports governance concerns: on July 29, the management committee reappointed Yongseok Kim as construction investment CIO for three years without external recruitment, and a report says the term was later reduced to one year after objection from the Minister of National Defense. Critics noted that Kim is a Korea Military Academy graduate, and an investment banking industry insider described external recruitment as standard practice at peer organizations. The association said the reappointment reflected a 224% operating profit increase under Kim and the securing of land for 4,749 housing units.