KIC up 8.3% in net value of stocks, debts in H1 2023

Korea Investment Corporation (KIC) saw the net value of its traditional assets rise 8.25% in the first half of this year, backed by the strong performance of global stocks. The sovereign wealth fund is eyeing private debt and infrastructure this year with a goal to expand alternative investments to 25% of assets under management (AUM), Chief Executive Jin Seoungho said on Thursday.  

Its public stocks and debts respectively achieved 14.39% and 1.87% increases in net asset value from January to June, the CEO said at a press conference in Seoul. The global stocks soared during the first half year as the US economy remained resilient and woes over the Federal Reserve’s tightening eased, he added.

The fund has increased investments in the tech sector in the long term and had low exposure to the financial sector, which was hit hard by the Silicon Valley Bank collapse. These strategies have benefitted its portfolio performance, he stated.

Wholly investing in overseas assets, KIC’s AUM increased 6.9% for the six months to $180.9 billion as of June 30. The state-run fund saw a record shortfall of $29.7 billion last year, or a 14.4% loss, as public stocks and debts tumbled.  

The fund didn’t disclose half-year returns on alternative investments. It said the alternative asset portfolio achieved 9.68% returns from 2018 to 2022. Private equity, real assets and hedge funds respectively posted 14.65%, 7.58% and 4.78% returns during the five-year period.

KIC found alternative investments improve its asset management, thanks to the nature of stable returns and low correlation with traditional assets. The sovereign wealth fund aims to raise exposure to alternative investments to 25% of its AUM by 2025, the CEO said.

It is considering increasing investments in private debt and infrastructure this year, which benefit from elevated interest rates. The institutional investor will also keep an eye on the fund’s liquidity as it manages foreign-exchange reserves, the CEO added.

KIC is planning to open its Mumbai office by the end of this year as India is emerging as a global manufacturing powerhouse amid the US-China trade feud. The sovereign wealth fund will have a strong focus on private equity, venture capital and infrastructure in India, Jin said.

The state-run fund is slated to intensify environmental, social and governance (ESG) factors for investment decision processes. It doesn’t invest in specific sectors, suchas those related to coal, weapons of mass destruction, tobacco and cannabis, and will set up more detailed standards for such exclusions during the second half of this year.

For responsible investments, KIC plans to actively voice opinions on its portfolio companies' management. It introduced a stewardship code in December 2018 and started the exercise of shareholder rights in 2019. The fund has picked 10 firms for such actions this year and will increase the number to 50 next year and 150 in 2024, the CEO said.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com
Jihyun Kim edited this article.