This article was posted on the ChosunBiz MoneyMove (MM) site at 3:48 p.m. on Dec. 16, 2025.
Pension funds are rushing to step up management and verification for fair value assessments of alternative investment assets after criticism from the Board of Audit and Inspection. They are selecting external institutions one after another for fair value assessments, creating an atmosphere of strengthening transparency and objectivity in asset valuation. Some institutions have even sent formal letters to domestic private equity fund (PEF) managers urging them to improve the accuracy of fair value calculations.
On Dec. 16, sources in the investment banking industry said the Military Mutual Aid Association recently signed a contract with KIS Asset Appraisal for fair value assessment and verification of alternative investment assets. The Korea Local Public Officials Mutual Aid Association, the National Fire Service Mutual Aid Association (NICE P&I), and the Police Mutual Aid Association (F& Asset Appraisal) have also recently confirmed institutions for asset valuation and begun work.
The Military Mutual Aid Association requested fair value assessments and verification for 156 domestic and foreign PEFs, investment associations, real estate and infrastructure assets. It is also reported to have requested external support for responses, such as preparing logical grounds and countermeasures, in case the Board of Audit and Inspection or the National Assembly requests materials and explanations related to fair value assessments.
The Construction Workers Mutual Aid Association (CW) recently selected NICE P&I as an external appraisal institution for fair value assessment and post-monitoring of alternative investment products. CW entrusted valuations for a total of 90 funds. The total size of the funds under appraisal is about 1.8258 trillion won. The Korean Teachers' Credit Union (The-K) is also proceeding with procedures to appoint external institutions to conduct fair value assessments and verification for 188 domestic and foreign assets (corporations finance, infrastructure, real estate).
The reason major domestic limited partners (LPs) are strengthening fair value assessment management is the Board of Audit and Inspection's criticism. According to the Board of Audit and Inspection's May announcement, only 17.4% of the 1,918 alternative investment assets held by nine domestic mutual aid associations had undergone external appraisal. Many cases were also revealed in which the general partners (GPs) simply reflected the valuation amounts submitted by the entrusted managers without verification, or carried acquisition cost on the books without reflecting actual changes in value.
In particular, the Police Mutual Aid Association had never received an external appraisal for 121 alternative investment assets worth 3.9989 trillion won as of the 2023 settlement of account. The Military Mutual Aid Association (2.0%) and the National Fire Service Mutual Aid Association (2.3%) also had very few assets appraised by external institutions. The Board of Audit and Inspection pointed out that "not only is the rate of fair value appraisal for alternative investment assets low, but the appraisal standards and procedures are also inconsistent."
Fair value is the value of an asset calculated at the current point in time. Mutual aid associations classify most alternative investment assets as available-for-sale securities and reflect valuation gains and losses at year-end in net income. Available-for-sale securities should be measured at fair value except in cases where there is no marketability. Three large pension funds—the National Pension Service (NPS), Teachers Pension, and Government Employees Pension Service—already conduct annual fair value assessments for alternative investment assets.
An industry official said, "After the Board of Audit and Inspection's criticism, major LPs are amending regulations related to fair value assessment and selecting external institutions to increase the intensity of management and verification," adding, "If large discrepancies or repeated errors occur between the valuations calculated by mutual aid associations and those reported by PEF managers, it is likely to be used as a penalty in future investment screening."