Skip to content
  • KOSPI 3006.16 -1.17 -0.04%
  • KOSDAQ 995.07 +1.37 +0.14%
  • KOSPI200 393.34 +0.16 +0.04%
  • USD/KRW 1175.8 0.20 0.02%
  • JPY100/KRW 1,031.72 3.87 0.38%
  • EUR/KRW 1,366.75 -3.12 -0.23%
  • CNH/KRW 184.04 0.22 0.12%
View Market Snapshot

ASK 2021 Panel talks

KIC says still premature to invest in cryptocurrencies

May 13, 2021 (Gmt+09:00)

NPS’ Kim Jun-geun (second from left), KIC's Yoon Sunghyun (second from right) and Korea Post's Lee Su Jin (right)
NPS’ Kim Jun-geun (second from left), KIC's Yoon Sunghyun (second from right) and Korea Post's Lee Su Jin (right)
The Korea Investment Corp. (KIC) is keeping an eye on cryptocurrencies as some famed hedge fund managers began investing in the virtual asset, but it is still premature for the sovereign wealth fund to invest in them, its senior manager said on Wednesday.

Yoon Sunghyun, senior director of the KIC's absolute returns group, said that the world's noted hedge fund managers capped their bitcoin holdings to around 1% of total assets. That could mean cryptocurrencies serve only as a hedging tool against inflation, rather than a meaningful investment asset.

"Furthermore, we are a tax-based sovereign wealth fund, different from Middle Eastern SWFs and college endowments, so we are taking a more conservative approach to them. I'm not making a value judgement about cryptocurrencies, though," Yoon said during a panel session on hedge funds of the ASK Summit 2021 hosted by The Korea Economic Daily on May 12.

"Lastly, we are incorporating ESG factors into our investment. Given the power consumption for bitcoin mining, its market volatility and the possibility of money laundering through bitcoin, they do not fit into our investment philosophy. Once they come within the regulated boundary, investor protection systems are put in place and their market volatility is subdued, then we may begin to invest in them." 

Last year, Paul Tudor Jones, founder and chief executive at Tudor Investment, said that bitcoin was a great speculation. But Jones said he had “just over 1% of his assets in bitcoin," which seemed like the right number at the moment.

In January this year, Ray Dalio, founder and chief investment officer of Bridgewater Associates, the world’s largest hedge fund firm, said in a note that bitcoin has succeeded in crossing the line from being a highly speculative idea to probably having some value in the future. But he added: "I could put an amount of money in that I wouldn’t mind losing about 80% of.” 

In comparison, another US hedge fund manager Bill Ackman told the Wall Street Journal on Wednesday that cryptocurrencies are a fascinating phenomenon and a brilliant technology, but his firm would not invest in them because there is no intrinsic value.

Regarding money allocation to hedge funds, a senior manager of the National Pension Service said the world's third-largest pension scheme will make efforts to secure capacity from established hedge fund houses because of competition among limited partners.

For Asia-focused hedge fund managers, Korea Post's insurance arm will focus on their capability of managing downside volatility, in addition to the liquidity and operational risk management capabilities, given the high volatility in Asian stock markets relative to developed markets.

The following are other key remarks from the three institutions' hedge fund managers at the ASK Conference 2021:

▶ KIC'a absolute returns group, Senior director, Yoon Sunghyun: 
Yoon Sunghyun, senior director of the KIC's absolute returns group
Yoon Sunghyun, senior director of the KIC's absolute returns group
"KIC began private debt investment this year for direct lending strategy. As our name change indicates from hedge fund team to absolute return roup, we will be able to pursue a barbell strategy of investing in both hedge funds and private debts."

"In search of medium-risk medium-return investments, we are considering private debts as a complementary good."

"We have already built a diversified portfolio. Now we are rebalancing them to strengthen fundamental strategies on expectations that returns would be lower under the current market conditions. Also, we are looking for customized solutions that meet our needs."

▶ NPS' Americas PE&HF team, Senior portfolio manager ,Kim Jun-Geun:
NPS Senior portfolio manager Kim Jun-geun
NPS Senior portfolio manager Kim Jun-geun
(Five managers at the NPS are in charge of 2 trillion won ($1.8 billion) worth of hedge fund assets. It has so far invested in two FoFs and five single hedge funds.)

"The reason that our hedge fund assets hardly increased last year was because of due diligence difficulty in the pandemic situation. Now we shifted into the contactless due diligence method. The five single funds we have invested in are composed of two equity long/short strategies; one event-driven; one macro; and one arbitrage. We need to increase exposure, so we put our focus on expanding our portfolio, instead of rebalancing."

"We had a hard time securing capacity from established hedge funds with good long-term track records because of increased competition. Those popular hedge funds hardly received additional money after soft and hard closing. Sometimes we kept our communication channel open for over one year with some hedge funds to secure capacity. Now it seems that securing capacity has become an important part of the investment process."

"NPS has yet to invest through a single managed account. But if we do in the future, we will take into account whether they offer advantageous redemption terms, or offer drastic fee cuts." 

▶ Korea Post (Insurance), Alternative investment division, Deputy director, Lee Su-Jin:
Lee Su-jin is one of the two hedge fund management officials at Korea Post's insurance unit
Lee Su-jin is one of the two hedge fund management officials at Korea Post's insurance unit

"We are looking positively to Asia-focused hedge funds. For equity strategy, Asian companies are less represented than developed markets despite their growing share in the global market and industries. Secondly, Asia is next to North America when it comes to investors' interest. Asia accounts for half of the global population and business activities in the region are picking up. There will be great investment opportunities, given the privatization trends of state-run companies, IPOs and dual listings. In particular, Asian stock markets show higher volatility than global markets, which should offer arbitrage investment opportunities."

"When selecting managers, we will look at their capability of managing downside volatility, in addition to liquidity and operational risk management capabilities, given the high volatility in Asian stock markets relative to developed markets."

"We withdrew from all our funds of hedge funds because of their double fee and high cost structure. Now we invested in seven substrategicis with a pool of 20 single hedge fund houses. Each strategy accounts for 10-20% of the total that represents 6% of our alternative assets. Now we are in the final stages of picking new hedge funds by strategy to bolster our hedge fund pool." 

Yeonhee Kim edited this article.

Comment 0

0/300