Korean firms eye alternative assets for safer investments, survey finds

South Korean corporates are increasingly eyeing alternative assets seeking downside protection amid interest rate hikes and equity and bond price drops, a recent survey of Korean business leaders conducted by Samsung Securities Co. has found.    

According to the survey of 180 CEOs and CFOs among Samsung’s domestic corporate clients, infrastructure and real estate topped the asset class they want to make new investments in or increase exposure to, scoring 19%. Government bonds and corporate bonds respectively ranked second and third, each scoring 17.7% and 15%.

Hybrid mutual funds & bond funds followed, scoring 12%, and private equities was picked by 10% of the respondents. Public equity funds was the least preferred, chosen by only 2% of those polled.        

Some 38.3% of the respondents target a 3-5% rate of return on their assets, and 28.3% target a 5-7% rate of return. Most of the surveyed leaders set the market interest rate as the benchmark, the survey found.   

Asked what they think will most affect the business environment during the second half of 2022, 38.3% of the corporate leaders chose the Federal Reserve’s rate hikes. Rising prices ranked second, chosen by 26.1% of those polled. Geopolitical risks, such as China’s lockdown and the Russia-Ukraine war, and the dollar-won exchange rate, all scored 17.7%.

More Korean business leaders are considering increasing alternative assets for stability in portfolio management, Samsung Securities said.  The Kospi has plunged by more than 21% since January, and the three-year treasury bond yield has jumped from 1.855% early this year to the current 3.31% level.

Samsung Securities said it sold 800 billion won ($612.6 million) worth of alternative asset funds to corporate clients from January to May and expects annual sales in 2022 to exceed 2021's 2 trillion won. The brokerage firm is selling real asset funds, as well as private equity and debt funds managed by global financial institutions such as Goldman Sachs Group Inc. and Blackstone Inc.

Write to Tae-Ung Bae at btu104@hankyung.com
Jihyun Kim edited this article.