Korea Investment Corporation Increases Allocations to Alternatives

By Nick Hedley

South Korea’s sovereign wealth fund grew its assets under management by 12% in 2021 and increased allocations towards alternatives, according to an annual update posted on its website.

The Korea Investment Corporation (KIC) – which manages funds on behalf of the Korean government, Bank of Korea and other public funds – says AUM rose to $205 billion by the end of the year, from $183 billion at the end of 2020.

Established in 2005, the fund has more than doubled in size since 2015, when AUM stood at $91.8 billion.

In 2021, KIC generated an investment return of 9.13%, thanks in part to a strong performance from private equity assets. Traditional assets generated an annual return of 6.75%, down from 14.6% in 2020.

Equities comprise 40.6% of total assets and fixed income 34.9%. Allocations towards alternatives rose to 17.5% at the end of 2021, from 15.3% a year before. Private equity has been a standout performer, with annualized returns of 11.33%, the fund said.

“Our sophisticated asset allocation strategy responded well to high market volatility and led to solid investment results last year,” said KIC CEO Seoungho Jin. “KIC will continue to expand alternative assets to support sustainable long-term performance.”

According to a report by Investment Magazine, Australia’s superannuation funds are also looking to private equity to boost returns.

Data from the Australian Prudential Regulation Authority shows that A$30 billion (US$21.5 billion) flowed into private equity in 2021.

The nation’s largest fund, AustralianSuper, recently announced that it will invest A$13 billion into private equity over the next two years – mainly in the U.S., Investment Magazine reported. It aims to increase its allocation to private equity from 5% to 7% over that timeframe.