KIC sees secondary and deep value investments as attractive

Korea Investment Corporation (KIC) is eyeing secondary and deep value strategies, the sovereign wealth fund’s Senior Director of Private Equity Team Ahn Seung-gu said at the alternative investment forum ASK 2022 on Oct. 26.

KIC sees the two strategies as attractive today and will continue to build up buyout, growth equity and venture capital, Ahn said during the limited partners' session for private equity and debt.       

KIC is the 14th-largest sovereign wealth fund with $205 billion in assets under management (AUM), of which alternative assets make up 17.5% as of end-2021. Private equity and debt together account for 7.7% of the AUM.

The institutional investor has bet on private equity and debt since 2009 via funds of funds (FoFs) and co-investments. It also manages the KIC Venture Growth Fund, an investment vehicle for early-stage tech ventures.       

Ahn shared her views on the secondary market, which has been garnering increased attention from Korean institutional investors over the past several years.

Some LPs, who over-allocated to private equities in bullish markets in the past, have become forced sellers as the market crashed – those equities on sale look attractive but it's a question of appropriate pricing.

Also, equity discount rates may become higher in the future if portfolio companies’ earnings before interest, taxes, depreciation and amortization (EBITDA) further drop during the first two quarters of 2023, she explained.

Many institutional investors in April-May saw market fundamentals as robust, but also expected declining cash-on-cash multiples to impact private markets. Today, however, they are more worried that the multiples will further drop with worsening fundamentals, Ahn said.

Nimble investors may find opportunities as some high-quality GPs' funds are traded at discounts of nearly 20%, she added.

KIC has taken a wait-and-see approach with new investments since the second half of 2022, the PE senior director said.

The sovereign wealth fund is implementing due diligence for some FoFs and will make commitments at the end of 2022 and early 2023, as well as take a more opportunistic approach to direct investments with stricter criteria than before.

With an expanded workforce in private equity and credit investment this year, it will strengthen collaborations with its global offices in New York, San Francisco, London and Singapore, Ahn said.

Write to Jihyun Kim at snowy@hankyung.com
Jennifer Nicholson-Breen edited this article.