[ASK 2017 SUMMIT] KIC eyes Asia, small firms for undervalued assets

The sovereign wealth fund will also expand into small-cap private debt funds and raise its exposure to Asian infrastructure, as it is aiming to diversify its portfolio by vintage, region and sector.

“Considering valuation, we are focusing on emerging markets where valuations are relatively low, especially Asia and small/mid-cap companies, as well as growth strategies,” KIC’s Chief Executive Sung-soo Eun said in a keynote speech for the ASK 2017 Global Private Debt & Equity Summit.

The conference was hosted by the Korea Economic Daily in Seoul on May 17.

“While making steady returns from medium risk/medium return private debt strategy including mezzanine (debt), we will maximize the effects of diversification through investing not just in mid-cap, but small-cap funds,” he added.

For private equity, real estate and infrastructure investments, KIC will join hands with other institutional investors with expertise in those segments and each country to solve the problem of information asymmetry.

It will also make use of networks of the World Bank Group, Asia Infrastructure Investment Bank and Asia Development Bank to boost infrastructure investment.

Eun said that KIC will look for investment opportunities in specialized sector funds such as consumer, telecom/media/technology and healthcare, too.

He reckons its assets under management will reach $200 billion in 2020, by when it will increase the share of alternative investments to 20% of total, from 13.7% at end-2016. Its AUM was $111 billion at end-2016.

But on hedge funds, he questioned their effectiveness, saying: “You must constantly examine whether the strategies you have used in the past make sense for a new market environment.”

KIC’s investment return turned to a positive 4.35% in 2016, from a negative 3.0% a year earlier, helped by solid returns from stocks and bonds.