South Korea's sovereign wealth fund to boost alternative investment allocation

[SEOUL] Korea Investment Corp (KIC), South Korea's sovereign wealth fund, said on Thursday it plans to increase the allocation for alternative investments - like real estate, private equity and hedge funds - to 25 per cent by 2027, up from 16 per cent as of May.

It also plans to adjust its portfolio to reflect concerns about inflation and long-term bond yields rising, and expectations for reduced liquidity.

"Alternative investments raised an annual return rate of around two to three per cent, which is relatively high, and therefore we plan to increase the allocation of that," said Jin Seoung-ho, the newly appointed chairman of KIC, in a news conference.

"We also plan to adjust the allocation of traditional assets like stocks and bonds, given concerns about inflation and bond yields rising," he added.

As of end of 2020, allocation of stocks, bonds and alternative assets stood at 42.7 per cent, 35.2 per cent and 15.3 per cent, respectively.

KIC, founded in 2005, manages funds entrusted by the government and central bank and invests entirely outside South Korea.

The wealth fund, which operates a total US$183.1 billion as of end of 2020, currently manages more than US$82.1 billion of the finance ministry's foreign exchange stabilisation funds and US$30 billion of the Bank of Korea's foreign exchange reserves.

REUTERS