The heads of South Korea’s public pension funds and sovereign wealth funds have given more details about plans to expand their alternative investment portfolios.
“We will expand the portion of overseas investment from the current 36% to 55% by the end of 2025, while expanding alternative investments at home and abroad to 15% from the current 12%”, National Pension Service (NPS) chairman Kim Yong-jin said at a conference hosted by a local newspaper on Wednesday (November 18).
The NPS, which had nearly 790 trillion won in total fund assets at the end of August, is investing 24.1996 trillion won, or 3.1% of the total funds, in domestic alternative assets and 67.545 trillion won, or 8.6%, in overseas alternative assets.
Kim, who took over as chairman in late August, said on the subject of overseas real estate investment: “We will strengthen our responsiveness to market fluctuations by investing in areas and sectors that are favorable for economic defense in consideration of environmental and social changes expected after Covid-19.”
Korea Investment Corporation (KIC) president Choi Hee-nam also told the conference his fund would be investing more in alternative assets.
“We are seeking to optimize our portfolio by expanding the ceiling on alternative investments to raise the expected return rate,” he said. “We will gradually expand the portion of alternative investments in KIC, which is expected to be 15.8% at the end of this year, to more than 20% in the future.”
KIC, which manages assets entrusted by the government and the Bank of Korea, started alternative investments in 2009, and they have steadily increased, though the portion fell slightly to around 15% in 2019 after a record high of 16.4% in 2018.
According to data presented by KIC for an annual parliamentary audit, the sovereign wealth fund had alternative assets worth $24.5 billion under its management at the end of 2019, out of total assets worth $157.3 billion.
Percentage of KIC’s annual alternative asset investment
(Reporting by Kyoungho Lee)