South Korea’s sovereign wealth fund Korea Investment Corporation (KIC) is planning to launched an office in Mumbai, according to The Korea Economic Daily.
The office would be the fund’s fifth overseas office, following New York, London, Singapore and San Francisco. The new office will improve KIC’s origination of deals and establish local partnerships.
KIC’s decision to establish an office in India’s financial capital follows Canada’s Ontario Teachers’ Pension Plan (OTTP), which set up shop last year. OTPP’s establishment of an office comes after Singapore’s Temasek (2004), Malaysia’s Khazanah (2008), Singapore’s GIC (2010), and Canada’s CPP Investments (2015). CDPQ’s office was opened in Delhi in 2016.
Infrastructure has been the main target for sovereign investors seeking opportunities in India. Currently, OTPP is India’s eighth biggest sovereign investor in India’s infrastructure sector, representing 5% of the US$19.4 billion deployed from 2016 to date. GIC is the leading state investor, contributing 23% of the capital in 2016-2022, followed by CPP Investments (15%), CDPQ (10%), ADIA (8%), Dubai World (8%), PSP (6%), and Temasek (5%). By origin, Canada is by far the biggest investor in the asset class, with its pension funds representing a combined 45% of total sovereign capital.
KIC’s move into India coincides with a drive to expand investment in alternatives to 25% by 2025, from 17.5% in 2021, much of which is expected to consist of foreign assets.
KIC posted an annual return of 9.13% for 2021 with assets under management reaching US$205 billion – exceeding the US$200 billion mark in the first time in its 16 year history. With a return on investment totalling US$16.9 billion in 2021, cumulative returns since 2006 reached US$87.9 billion. At this pace of growth, it should easily meet its target of US$400 billion by 2035.
The fund is still heavily oriented to more conventional asset classes with public equity totalling 40.6% of AUM and fixed income contributing a further 34.9%. Yet, alternative investments now make up 17.5% of the portfolio, up from 15.3% in 2020, with private equity totalling 7.7%, real estate and infrastructure 6.5%, and hedge funds 2.7%. The annualized return for private equity was 11.33% in 2021, with real estate and infrastructure at 7.76% and hedge funds at 5.64%, while traditional assets generated an annual return of 6.75%. These results lend support to KIC’s aim of raising its alternatives asset allocation to 25% by 2025 – a target that was moved forward by two years as the sovereign wealth fund gains confidence in its private markets investment strategy.
India is particularly attractive due to its large population and growth potential. India is set to be the main driver of road infrastructure investment in Asia over the medium-term, with the country home to both the highest number of projects in the region with 633 projects.
A US$270 billion plus pipeline of projects reflects the government’s aim to modernise Indian highways and upgrade the quality of roads as part of the country’s National Infrastructure Pipeline (NIP). The NIP aims to support growth of India’s infrastructure sector with total investment of US$1.4 trillion and is bolstered by liberalization of FDI regulations and highway privatization.
