Korea Investment Cooperation (KIC) is zooming in on lending to small to medium-sized companies and targets Asian private equity deals in pursuit of mid-teen returns as competition for alternative assets is rising, said its senior officials.
KIC’s private debt investments have been heavily weighted towards developed markets and made through funds, but competition and higher valuations forces the sovereign fund to seek differentiated approaches to alternative assets, Heenam Choi, CEO of the sovereign fund, said on May 29.
“In the private debt market, numerous investment opportunities will be created from lending and providing credit to small and mid-cap companies, which will generate stable incomes,” he said in a keynote speech for the ASK 2018 Global Private Equity & Debt Summit hosted by the Korea Economic Daily in Seoul.
For private equity, KIC will shift towards China and other Asian markets away from North America, and take opportunistic approaches with focus on healthcare, telecoms/media/technology and consumer goods, he added.
North America represented 53.5% of KIC’s investment assets at end-2016, followed by Europe with 25.6% and Asia with 17.3%, according to its website.
The $134 billion sovereign wealth fund targets mid-teen returns for both private equity and private debt investments, Jae-Won Shin, director of private equity at KIC, said in an LP panel discussion later on the day.
It will also expand socially responsible investment by allocating capital to an ESG fund and embrace stewardship responsibilities without delay.
“As a sovereign fund managing money entrusted by the government, we will take into consideration not only the rate of return, but also environmental, social and governance (ESG) factors, when making an investment decision,” the CEO noted.
Choi’s speech echoed the remarks his predecessor Sung-soo Eun made during the ASK Summit last year.
But he differs on hedge funds, saying that increased market volatility will create more investment opportunities for hedge funds which have already got a boost from last year’s strong market rallies.
“We will find talented (hedge fund) managers by improving research and networking and continue to rebalance portfolios,” Choi added.
Last year, Eun doubted if the hedge fund strategies of the past would work in a new market environment.
KIC formed a five-member in-house team dedicated to hedge fund investment in 2017, said Junghee Han, director and head of KIC’s hedge funds in an LP panel discussion on May 30.
With $4.7 billion committed to hedge funds, it is the most active hedge fund investor among South Korean institutions.
Han noted that KIC will gradually lift the proportion of hedge funds to 4-4.5% of total assets from the current 3.5%.
By Chang Jae Yoo
<Edited by Yeonhee Kim>
(Updated on May 31 to add three paragraphs from bottom)