Korea's sovereign wealth fund posts 8.25 percent return in H1

Korea Investment Corporation (KIC) Chairman & CEO Jin Seoung-ho speaks during a press conference in central Seoul, Thursday. Courtesy of KIC

KIC to open up liaison office in India's Mumbai by end of this year

By Anna J. Park

Korea Investment Corporation (KIC), the country's sovereign wealth fund, has posted an 8.25 percent return on traditional asset investment during the first half of this year, adding approximately $11.6 billion to the fund's net asset value of $180.9 billion, as of the end of June.

During a press conference marking the KIC's 18th anniversary, KIC Chairman and CEO Jin Seoung-ho explained that the result is attributable to the increased preference for risky assets in the global market.

“The prevalent market perception is that the peak of inflation has passed, mitigating concerns over further recession. The maintenance of solid fundamentals in real economies, including the U.S., has also contributed to the revival of psychological preference for risky assets among investors, which resulted in the rise of stock prices,” Jin said during a press conference held in central Seoul on Thursday.

Specifically, the rate of return in stock investment alone stood at 14.39 percent during the first six months, while bond investment posted a 1.87 percent return. As for alternative investment that includes private equity funds, real estate investment in overseas countries, infrastructure investment and more, the KIC stated that the average annual return during the past five years stood at 9.68 percent. Due to its relatively more illiquid nature, the official assessment of the value of alternative investments is conducted at the end of every year.

The sovereign wealth fund added that it successfully managed market risks stemming from U.S. banks earlier this year, such as the sudden collapse of Silicon Valley Bank (SVB), as it allocated a lower-than-benchmark portion of investments in financial sectors. The KIC also ascribed the positive return to steady investment into U.S. tech stocks that soared amid the ChatGPT-led AI fever.

Korea Investment Corporation (KIC) Chairman & CEO Jin Seung-ho, third from right, speaks during a press conference in central Seoul, Thursday. Courtesy of KIC

As to investment strategies for the second half of the year, the sovereign wealth fund said that it has prepared various possible scenarios regarding the market outlook and that, the most basic forecast is that the global economy will be able to achieve a soft landing during the second part of this year.

“Opposed to last year's rampant concerns over global economic recession, the fundamentals of households and corporations remain at a solid level throughout this year. Furthermore, inflation seems to be on a general downward trend, although core inflation is still sticky. We're still concerned over the lag effect from long-held high-interest rate policies, yet all in all, we view that there's a low possibility of a serious recession during the second half of this year,” the KIC chief told The Korea Times during the press conference.

The KIC vows to continue diversifying its investment portfolio, aiming to have more control over market instability. It also aims to increase the proportion of alternative investments to 25 percent by 2025, from 23 percent last year, in order to raise the long-term rate of return.

Meanwhile, the sovereign wealth fund is planning to set up a liaison office in Mumbai, India, by the end of this year. The KIC said India is a key beneficiary of the reorganization of global supply chains and a rising power of the global economy with a huge and young population.

“India is expected to post rapid economic growth in the future, with abundant opportunities of investment for venture capital, private equity and infrastructure,” the KIC chief highlighted, adding that key sovereign wealth funds like the Government of Singapore Investment Corporation (GIC), as well as global private equity firms like KKR, are operating offices in India.

Currently, the KIC operates offices in New York, London, Singapore and San Francisco.

Founded in 2005, the KIC started with assets worth $1 billion, which soared over $180 billion during the past 18 years. Now the fund is the world's 14th-largest sovereign wealth fund. It was also ranked in the global top seven in terms of transparency, credibility and responsible investment.