Administrative Mutual Aid Association’s Chief Investment Officer, Heo Jang, has announced plans to reduce real asset holdings and increase investments in private loans over the next five years. This decision comes in light of the continuing high-interest rate environment, which adds attractiveness to the private loan market. The growing investment in artificial intelligence (AI) by U.S. companies is also seen as a driver of growth potential, with the U.S. stock market expected to have upward momentum, led by big tech firms.
During the POBA Money Show held in Seoul, Heo stated that considering the current policy situation, where former U.S. President Trump traded war policies, the inflation burden will not ease easily. Despite the U.S. federal funds rate currently being at 4.5%, he anticipates that even with any interest rate cuts, it will remain in the 4% range.
He also mentioned the possibility of a new Plaza Accord, an agreement similar to that in 1985, which aimed to reduce the value of the dollar by coordinating with Japan, Germany, the U.K., and France.
Heo remarked that Trump’s move to increase tariffs is ultimately aimed at lowering U.S. corporate taxes, a stance that could inadvertently strengthen the dollar, forcing other exporting countries to devalue their currencies to maintain competitive pricing.
From an investment standpoint, Heo sees significant growth potential in the U.S. stock market. Despite concerns over big tech companies, investment in AI continues to rise, and the U.S. holds dominance in AI infrastructure with 5,400 data centers nationwide, far surpassing any other country.
The U.S. stock market’s price-to-earnings ratio is lower compared to the IT bubble era, and the continued growth of U.S. market capitalization compared to Europe suggests further upward trends. He maintains a positive outlook on the U.S. real estate market, specifically regarding Real Estate Investment Trusts (REITs), and views emerging markets like India and Vietnam favorably due to their young, dynamic demographics.
As of the end of last year, the Administrative Mutual Aid Association’s investment portfolio included 30.5% in real assets, 24.5% in private credit, 20% in private equity, 8.5% in stocks, and 8.3% in bonds. Heo emphasized a balanced portfolio approach, leveraging high-interest financial circumstances to prioritize private credit investments. The strategy focuses on high-yielding loan products to secure stability, while real asset investments are noted to have cyclical risk exposure, hence the shift towards high-interest loans and dividend-paying investments.