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Korea Investment Corporation to invest $1bn in alternatives

The sovereign fund will resume overseas investments following a $3bn cash injection by the Korean government.

The South Korean government will inject $3 billion into the Korea Investment Corporation (KIC), allowing the sovereign fund to resume overseas investments. Of the $3 billion that KIC will receive, $1 billion will be invested in alternatives, Sang Joon Kim, head of investment strategy at KIC, said in an interview.

Reuters reported that KIC had stopped investing overseas after it suffered heavy losses on its $2 billion investment in Merrill Lynch, a deal struck in early 2008.

KIC is currently considering investments in alternative assets including private equity, Kim said, declining to divulge further details of the firm’s investment strategy. In its 2008 annual report, KIC says: “We plan to invest in LBO, mezzanine, distressed, growth capital, venture capital and real estate funds.” 

KIC was formed in 2005 to manage a portion of the country’s foreign reserves. It began operations with a sum of $20 billion, of which the Bank of Korea contributed $17 billion and the Ministry of Finance and Economy $3 billion.

The fund currently manages assets of $25 billion, Kim said. It has only recently started its private equity programme, he added.

The sovereign fund specialises in foreign investments, the bulk of which have been made in foreign bonds and overseas stocks.