KIC targets 15% allocation to alternatives in 2015

Korea Investment Corporation, the Seoul-based sovereign wealth fund, with $86 billion in assets under management, has set a target allocation of 15 percent to alternative assets by the end of 2015, according to Hongchul (Hank) Ahn, its chief executive officer and chairman.

Speaking at celebrations marking the 10th anniversary of KIC’s founding, Ahn spoke of KIC’s plans of increasing its allocations to alternative assets to eventually compare with the allocations made by other endowments and pension plans.

“In order to achieve sustainable and higher returns on our investment, we have to increase the portion of alternative assets from the current 8 percent to 50 percent or higher down the road like Yale and other US university endowments and CPPIB and other American and Canadian pension plans,” said Ahn in the speech now posted on KIC’s website.

He added further: “We truly have a long way to go and it is a daunting goal given that our AUM keeps rising so fast. Still we will not be intimidated at all and plan to increase the portion of alternative assets to 15 percent by year-end.”

A KIC spokesperson, when contacted by PERE, refused to disclose specific investment targets for the real estate sector.

Ahn had stated plans of further diversifying the portfolio in KIC’s 2014 annual report released earlier this year as well, in which he said that KIC “plans to strategically increase investments in alternatives assets which offer attractive risk-adjusted returns which are higher than available in traditional assets.” However, no investment targets were disclosed.

There has been no increase in the allocation to alternative assets in 2014 as compared to 2013. Alternative assets have continued to represent 8 percent of the fund’s portfolio in the last two years. Within the alternatives sector however there was some increase in the allocation to real estate – from 1.5 percent in 2013 to 1.8 percent in 2014.

In March, KIC entered into a joint venture partnership with the Investment Corporation of Dubai to make joint investments in various asset classes including real estate. The two funds have also hinted at the possibility of establishing an investment fund in the future, though the size and other details of the proposed vehicle are yet to be known.