Korea's KIC boosts alternatives exposure to $15.1b

The sovereign wealth fund ended the year with $110.8 billion – up from $91.8 billion in 2015 – with a turnaround in public equities and fixed income holdings helping the portfolio generate a one-year return of 4.35%. Sung-Soo Eun, KIC’s chairman and CEO, noted that investor sentiment declined in 2016 and he was cautious about the prospects for the coming year.

“Despite the prospect that the global economy will recover moderately in the US and in some emerging economies this year, the potential for instability – as a result of the spread of protectionism, further interest rate hikes in the US, structural reforms in China, and instability in the EU – is significant,” Eun said in KIC's 2016 annual report.

He identified real estate – intensified competition notwithstanding – private debt, and infrastructure as areas within alternatives where the sovereign wealth fund is looking to boost its exposure.

The $15.1 billion invested in alternatives compares to $11.4 billion in 2015 and $6.8 billion the year before that. KIC had $4.6 billion in private equity, $5.7 billion in real estate and infrastructure, $4.2 billion in hedge funds, and $600 million in cash equivalents. The PE portfolio has grown from $3.5 billion in 2015, $3.2 billion in 2014, and $2.6 billion in 2013.

The alternatives program has delivered a return of 6.57% since it was set up in 2009, down slightly from 6.78% at the end of 2015. Private equity has generated 4.92%, compared to 7.65% for real estate and infrastructure, and 6.55% for hedge funds.

Eun, who was previously an executive director at the World Bank, was appointed in January of last year following criticisms of internal governance and investment decision making at KIC. Six months later, Shin-Woo Kang, most recently CEO of Hanwa Asset Management, was brought in as CIO.

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• Topics
• North Asia
• LPs
• Performance
• South Korea
• KIC
• Sovereign wealth fund