KIC CEO to step up startup, ESG investments

Korea Investment Corporation (KIC) will step up investment in startups and environmental, social and governance (ESG)-themed investment as it aims to more than double its assets to $400 billion under management over the next 15 years, its Chief Executive Officer Choi Heenam said.

Last year, KIC earmarked $200 million for startup investments, part of which was funneled into US autonomous vehicle maker Luminar and US stock trading app Robinhood.

The sovereign wealth fund has introduced a fast-track system to allow its chief investment officer to make an investment decision on startups without reporting to CEO Choi, while capping the amount of its single startup investment at $20 million.

“Speed is the key to startup investment. If we have to go through a series of internal reporting steps on any investment, we may lose a good opportunity,” Choi told The Korea Economic Daily in a recent interview.

“Although our startup investments remain small, they are meaningful in that we are exploring new promising investments for better returns.”

As part of its efforts to improve deal sourcing and increase direct investment in startups, KIC is opening a San Francisco office later this year.

KIC, with $157.3 billion in assets under management, began startup investments in 2017, most of which were entrusted to outside asset managers.

Since adopting an ESG-themed investment program in 2019, KIC has been expanding its allocation to ESG funds from the current $360 million, in line with the global trends of boosting sustainable investment, Choi said.

In the first half of this year, global ESG funds attracted a combined $116.8 billion, the largest amount of ESG-themed funds ever for a six-month period, he noted.

Since taking office as KIC's chief executive in March 2018, Choi has established an in-house division in charge of medium- to long-term asset allocation strategies; changed the evaluation system to an absolute return-based one; and increased the performance bonus portion in employee payouts.

Choi aims to boost KIC’s assets to $400 billion by 2035 to become one of the world’s top 10 sovereign wealth funds from its current 15th position, to gain better access to lucrative investment deals.

To achieve the goal, KIC is seeking a law revision to manage assets on behalf of mutual aid associations and national cooperatives. Under the current Korean law, KIC is only allowed to manage part of the foreign currency assets held by the Bank of Korea and the finance ministry. 

KIC posted an investment return of 6.5% for the first eight months of this year, one of the highest returns among global sovereign wealth funds, surpassing the 3.6% return reported by the National Pension Service during the same period.

Choi attributed the strong return to its diversified investment in asset classes over the long term.

Last year, its investment return reached 15.4%, which translated into $20.2 billion in proceeds, marking its record-high annual investment gain. 

Touching on the economic outlook, Choi said he expects a gradual and slower-than-expected recovery due to the prolonged pandemic era.

“The global economy is likely to recover to the pre-COVID-19 level only by the second half of 2022, or the first half of 2023 at the earliest,” he said.

Write to In-Seol Jeong and Jin-gyu Kang at surisuri@hankyung.com
Yeonhee Kim edited this article.