KIC reduces alternative investments

South Korean sovereign wealth fund Korea Investment Corporation (KIC) reported a reduced proportion of alternatives assets in 2019.

According to an annual report released by KIC, alternative assets accounted for 15.6 percent of its total assets under management at the end of 2019, falling by 0.8 percentage points year-on-year.

The figure represents the first decrease since KIC started investing in foreign alternative assets in 2009. Until 2018 the proportion of overall alternative assets, such as private equity, real estate, infrastructure and hedge funds, had grown every year to surpass 10 percent for the first time in 2015 with the steepest rise more than 4 percentage points.

The fund’s strong investment return on traditional assets, which was 16.6 percent, resulted in the proportion of alternative investments in its total portfolio dropping to 15.6 percent in 2019 from 16.4 percent in 2018, the report said. Alternative assets managed by KIC increased about 1.4 percent to $24.5 billion, which coincides with a steady growth in the fund’s total assets under management that reached $157.3 billion at the end of 2019 on a net asset value basis.

Traditional investments accounted for more than 84 percent of the fund’s total assets last year. But KIC plans to gradually increase its proportion of alternative investments to 20 percent in the mid-to-long term in search of higher returns. The fund’s alternative assets grew at a compounded annual growth of more than 16 percent over the last five years through 2019.

KIC achieved an investment return of 15.39 percent in 2019, a notable improvement from a negative return of 3.66 percent in 2018. This was largely attributable to a favorable investment environment, such as accommodative global central bank policy and its enhanced asset allocation capabilities, KIC said in the report. KIC recorded an annualized average return of 5.55 percent for the past five years. (Reporting by Ar-rum Rho)