Secondaries valuations remain challenging – KIC

Given the difficult fundraising environment, secondaries opportunities are expected to increase in both direct and conventional form, but industry participants identify settling on a valuation that is acceptable to all parties as a persistent problem.

In recent years, institutional investors in Asia have increased their exposure to secondaries in order to temper the J-curve effect on portfolios that are, in numerous cases, still quite young and therefore don't feature a wide range of fund vintages. KIC's private equity activity was virtually non-existent in 2009 but over the course of three years it deployed about $10 billion across a spectrum of alternative investments.

Asian LPs have also shown greater appetite for strategies that generate immediate yield, such as credit and infrastructure funds.

Lee also told The Wall Street Journal that KIC, which has more than $56 billion in assets under management, will overweight China compared to its normal benchmark, noting that the sovereign wealth fund should expand its renminbi exposure.

KIC is actively looking for co-investment opportunities as well as qualified managers in China, although it still predominantly operates as an LP in co-mingled funds. Separate accounts are also used, depending on the specific need.

Lee added that KIC has considered opportunities to acquire stakes in GPs, but valuing these assets can be difficult, given the unpredictability of future cash flows and the succession planning issues within PE firms.

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• Topics
• Secondaries
• Secondaries
• North Asia
• LPs
• Secondaries
• KIC
• South Korea
• LPs