Today’s opening of a San Francisco office by the Korean Investment Corporation (KIC) indicates the US$183 billion sovereign wealth fund is serious about its long-term commitment to US tech startups.
The move into California’s tech hub forms part of the Korean SWF’s drive to raise its allocation to alternatives from 15.3% at end-2020 to 20%, to diversify risk and maintain strong returns.
KIC’s tech-related investments are currently concentrated in public equities, such as Tesla in which it has recently increased its position. An office in San Francisco should spur investment in venture capital in private markets.
KIC began startup investments in 2017, most of which were entrusted to outside asset managers. Signalling it wished to be more hands-on with direct investments, it has recently introduced a fast-track system in which its chief investment officers can invest up to US$20 million in startups without the CEO’s prior approval. The move should allow the new office to make more rapid decisions on participating in earlier stage funding rounds, enabling KIC to become embedded in the tech investment ecosystem.
Last year, KIC posted an annual return of 13.7% - a second successive year of double-digit growth following 15.4% in 2019. In just five years, it doubled in size to US$183 billion. At this pace of growth, it should easily meet its target of US$400 billion by 2035. Portfolio diversification with an eye on long-term yield from sectors like tech will be crucial to its growth story.
KIC’s San Francisco operation brings the total number of offices of state-owned investors in the city to eight, putting the city ahead of Toronto, Luxembourg and Shanghai which each have seven, but one less than Singapore which has nine. It is KIC’s fourth overseas office, after New York (2010), London (2011) and Singapore (2017).
