Korea's sovereign wealth fund earns $21.8 bil. in 2020 amid pandemic
Korea Investment Corporation (KIC) CEO Choi Hee-nam speaks during an online press conference, held at KIC headquarters in central Seoul, Tuesday. / Courtesy of KIC
KIC's operating asset doubled in five years to $183 billion
By Anna J. Park
Amid the COVID-19 pandemic shock sweeping the global economy last year, Korea Investment Corporation (KIC) ― the country's sovereign wealth fund ― gained a total of 23.7 trillion won ($21.8 billion).
This increase represents an annual return of 13.7 percent, enabling the sovereign wealth fund to record double-digit investment returns for the second consecutive year. KIC logged a 15.39 percent profit return in 2019
In other words, KIC reaped about 46 trillion won ($42 billion) in just two years. This amount accounts for about 60 percent of the sovereign wealth fund's entire investment gains made since its investment inception back in 2006.
“Based on these remarkable records, KIC's entire operating asset size doubled to $183.1 billion or about 200 trillion won in just five years, since the size stood at $91.8 billion in 2015,” KIC CEO Choi Hee-nam said during Tuesday's online press conference.
“The investment strategies by KIC were regularly rebalanced to create an additional alpha profit, while its portfolio portions of stocks and bonds were also well-divided according to market changes.”
KIC operates a part of the nation's foreign currency reserves and government assets by the Ministry of Finance and Economy. Currently, there are about 40 different sovereign wealth funds around the world, and KIC is ranked the 14th-largest.
As of now, Norway operates the largest sovereign fund ― Norges Bank Investment Management (NBIM) ― with an operating asset size of about $1.12 trillion, followed by China Investment Corporation with $1.04 trillion, Abu Dhabi Investment Authority with $579.6 billion, and Hong Kong Monetary Authority with $576 billion. As KIC CEO Choi mentioned, KIC operates $183.1 billion.
“KIC's asset size, among other sovereign wealth funds, is the 14th-largest. KIC will not be complacent about its past achievements, as it attempts to join the world's top 10 largest sovereign wealth funds with an operating asset size of over $300 billion,” the CEO said, stressing KIC will continue to do its best to maximize investment profits.
The CEO said that about 84 percent of its investment portfolio consists of traditional assets like stocks and bonds, and the fund is increasing its percentages in alternative asset investment for diversification of risks and for creating long-term and stable profits. Alternative assets account for about 15.3 percent of the sovereign wealth fund's total assets, followed by 42.7 percent in stocks and 35.2 percent in bonds.
However, regarding whether the sovereign fund could yield another double-digit investment return this year, the CEO was more cautious.
“As vaccination programs are taking place globally, economic recoveries could accelerate. Yet given the global economic situation, consisting of low growth and low interest rates, long-term investment returns could likely see a gradual decrease. We'll have to see for now,” he said, adding that the state-run investment corporation will do its best to achieve its aimed rate of returns.
The national wealth fund also stressed that environmental, social and corporate governance (ESG) principles have become a key consideration in every investment decision. According to the CEO, ESG investment principles are applied to a wide spectrum of investments from venture tech investments to sustainable eco-friendly alternative energy investments.
New overseas office in San Francisco
KIC is also planning to open its overseas office in San Francisco in the U.S. sometime during the first half of this year.
“The opening of the office in San Francisco was originally planned for last year, yet it was delayed due to COVID-19. Currently, some of our employees are already deployed there preparing for the opening of the office,” Choi said.
“The new office aims to enhance its competitiveness in alternative and tech investments in venture companies residing in the North American region.”