South Korea’s Teachers’ Pension will compete with financial firms in the 5 trillion won ($4.1 billion) private universities asset management market, the ChosunBiz reported last week.

Citing financial industry sources, the local media reported that the South Korean Government would revise the “Financial and Accounting Rules of Private Schools” to add the Korean Teacher’s Credit Union (KTCU) to the asset managers pool in which private schools can deposit their revenues. Under the current rules, private schools are only allowed to deposit their revenues in “financial firms such as banks”.

KTCU, the pension fund for South Korean private school teachers and employees, has 820,000 members and manages 26.5 trillion won in assets. Along with the National Pension Service and Korea Post, it is called a “big player” in the Korean pension fund industry.

Local media said KTCU has long experience in managing teachers’ retirement funds, so it can compete well with financial firms once it enters the private school fund management market. KTCU has started to revise its articles of union in line with the revision of the rules.

The current private school law allows universities to invest up to one-half of their reserves. Private universities have 7.8585 trillion won in reserves and 2.45 trillion won in private colleges. Assuming half of this is available, the asset management market at private universities is estimated to be worth 5 trillion won.

Private school funds tend to prefer stable investment such as bank deposits. However, due to prolonged low interest rates, returns have decreased leaving the management of funds to securities firms and asset management companies, the report said. (Reporting by Kyoungho Lee)