KIC to up alternative assets to 25% of AUM by 2025

Korea Investment Corporation (KIC) will continue to expand alternative investments while strengthening its asset management skills by increasing direct investments, Jin Seoungho, chief executive of the South Korean sovereign wealth fund, said in his keynote speech at ASK 2022. ASK is The Korea Economic Daily's biannual forum on global alternative investment.

The world’s 14th-largest sovereign wealth fund, managing $205 billion in assets as of the end-2021, invests its whole capital in overseas assets. Its alternative investments expanded from 15.3% to 17.5% of its assets under management (AUM) in 2021. The sovereign wealth fund is aiming to increase alternative assets to 25% of the AUM by 2025, the CEO said.    

Private equity makes up 7.7% of the AUM, and real estate & infrastructure and hedge funds respectively account for 6.5% and 2.7%.

For global private equity investment, KIC is betting on promising long-term sectors such as healthcare, tech, automation and mobility, as well as seeking out venture capital investment opportunities. The CEO said KIC takes a conservative approach to PE investment, being cautious about market volatility and price rises in commodities.  

Its private debt investment focuses on downside protection, with direct lending as the main strategy. Other strategies include corporate mezzanine and distressed debt, he added.  

Also, the sovereign wealth fund has proactively invested in global data centers and logistics centers in line with its secular investment trend, while building a mid-to-long-term real estate portfolio with various strategies. It is also seeking investment opportunities in multifamily housing and life science offices, the CEO said. 

For infrastructure investment, it is looking for opportunities in the transportation sector, fast recovering after the peak of the pandemic. It is also eyeing digital infrastructure, energy transformation and social infrastructure segments such as hospitality and nursing homes, as well as focusing on assets relatively immune to economic fluctuations.    

In addition, KIC continuously rebalances hedge fund portfolios to enhance absolute returns in the long term.

It will intensify environment, social and governance (ESG) and responsible investment as well as increase partnerships with domestic asset managers and securities firms, the CEO said. It also plans to intensify the asset management system to implement its new algorithm-based investment strategies using artificial intelligence and big data analysis.

Backed by the Korean government and the Bank of Korea (BOK), KIC has been in talks with the two parties about increasing entrusted assets in a bid to rank among the global top 10 sovereign wealth funds. Last week, the new government of Korea will accelerate entrusting KIC with capital from some small-sized retirement funds and mutual aids, according to a recent version of the national action plan.

Write to Hyun-Ju Jang at blacksea@hankyung.com
Jihyun Kim edited this article.