Korea Investment Corp., South Korea’s $30 billion sovereign wealth fund is looking to raise asset allocation to equities later this year targeting markets in the US and Asia.
In an interview with Bloomberg, the fund’s Chief Investment Officer Scott Kalb said , “It’s unlikely that bonds are going to continue to outperform stocks from here over the long term. We’re moving more towards equity.”
As of now equities account for 40% of the ‘traditional’ portfolio of KIC which it plans to hike to 50% within the next five months. Equities and fixed income securities makes up 90% of KIC’s total assets which means $2.7 billion worth of additional funds finding its way into equity.
KIC is seeking a mix of value buys in US(where markets have crashed) and selective growth pick in Asia which has performed better than the developed nations despite the global economic slowdown.
KIC already owns shares of Bank of America Corp after its holding in Merrill Lynch was converted(post the merger of Merrill Lynch and BoA). The fund had invested $2 billion in Merrill Lynch in January 2008, less than a year before it was sold to Bank of America following the credit crisis which killed other peers such as Lehman Brothers.
At the same time KIC is also planning to start investing $1 billion this year in “alternative investments,” including real estate, commodities and private-equity and hedge funds as per a statement of its CEO last week. Initially these investments will focus on assets that would hedge against inflation. The sovereign wealth fund set up in July 2005 targets inflation adjusted returns of 4-5% on its investments.
MORE MONEY COMING OUT OF KOREA
South Korean state-run National Pension Service also plans to double its international assets within the next six years by investing in the Brazil, Russia, India and China(BRIC) pack besides other Asian countries. Foreign investments may jump to 15% of NPS’s assets under management from 7.4% currently. NPS, the world’s fifth-largest pension fund, has AUM of $204.7 billion which means it is looking at additional flow of $15 billion in the next six years in the targeted regions.
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