Korea Investment Corporation’s (KIC) new chief executive Seoungho Jin has shaken up his top team as he looks to ramp up investment in private markets by 2027.
KIC is aiming at alternatives asset allocation of 20% of AUM by 2024 and 25% of AUM by 2027, up from 15.4% at end-2020. These include forming joint ventures with other state-owned investors, co-investments with general partners, or direct investments.
Growth in private markets rests on the establishment the Future Strategy Group, which combines the Securities Investment Division, formerly known as Investment Strategy Division, and the Alternative Investment Division.
The focus is likely to shift to startups, particularly in the US. In March, KIC opened its San Francisco office, indicating it 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 to diversify risk and maintain strong returns. KIC’s tech-related investments are currently concentrated in public equities. 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 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.
The overhaul of the top management team also indicates a desire for more private market exposure. Recent appointments are all internal promotions, rather than external hirings, and include:
Choi Seo Jin was appointed head of infrastructure, having previously worked in KIC’s NYC office.
Joseph Cha Hoon was appointed head of real estate
Lee Seungkul moves from head of real estate to lead the Future Strategy Group
One means to ramp up private investments is through co-investments. In May, KIC teamed up with the National Pension Service (NPS) in their first ever co-investment, piling a total of US$600 milllion into a US$2 billion North America logistics real estate fund managed by GLP Capital Partners. The investors are looking to capitalize on the rapid growth in logistics in the wake of the pandemic, which stimulated the e-commerce market and raised demand for big-box storage and distribution warehouses.
As it has evolved its asset allocation, KIC reported strong performance in recent years. In 2020, it 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. However, in January CIO David Park said, "We will increase our allocation to infrastructure assets and cut investments in real estate.”