Industry ponders KIC chief's resignation

Ahn Hong-Chul has reportedly resigned as president and chief executive of sovereign wealth fund Korea Investment Corporation, with sources unsure as to reasons behind the move.
Industry ponders KIC chief's resignation

The president and chief executive of Korean sovereign wealth fund KIC, 'Hank' Ahn Hong-Chul, has resigned, according to local media, with sources unsure about the motivation behind the move.

The surprise development, which emerged late last week, comes shortly after the CEO and CIO of Korea’s $450 billion National Pension Service (NPS) were both forced to step down after a row between the two spilled into the public domain.

Ahn had served as CEO of Korea Investment Corporation since December 2013 in his second stint with the organisation, having already served as its first auditor between 2005 and 2008.

He had rejoined KIC to replace Choi Chong-Suk, who quit on October 21, 2013, as reported. Choi had received a ‘D’ rating in an evaluation of his 2012 performance by the strategy and finance ministry (‘A’ being the highest and ‘E’ the lowest).

Whether Ahn left over performance issues was unclear as AsianInvestor went to press. One source said: “Every time the markets turn negative, which is what has happened over the past year, KIC underperforms Bank of Korea [BoK] despite the fact its [KIC's] mandate is not specified in terms of risk tolerance or performance.”

KIC’s annual average rate of return has been 7.43% over the past five years and 4.23% over the past 10. But it recorded 10.03% in 2014, surpassing the benchmark of the strategy and finance ministry and BoK by 1.31%.

Ahn had only recently spoken about ramping up KIC’s allocation to alternative investments to 20%, from 8%, to be more in line with Yale University endowment, Calpers and the Canada Pension Plan Investment Board, as reported.

He had spelled out KIC’s ambitions on July 1 at a seminar to celebrate the 10th anniversary of the fund’s formation, voicing expectations it would surpass $100 billion in assets by the end of this year. KIC had $86 billion as at the end of June, having started with $30 billion at its inauguration in 2005.

It emerged in July that KIC had scrapped plans to buy a 19% share of US baseball team the LA Dodgers in a deal that spilled out into the public domain. The decision rested on the high risk of losing the entire investment and unfavourable contract conditions, KIC said in a statement.

In some circles Ahn was viewed as a controversial choice as CEO of the sovereign fund on account of his outspokenness. “He was very vocal,” said one local source. “He set up a research department at KIC and sought to divide research and investment management, including a 50% increase in headcount.

“But KIC’s reputation was put at risk with the LA Dodgers deal, which was not supposed to be mentioned. What has happened [with Ahn’s resignation] is behind the curtain. It is a bit too early to find out yet.”

Another source added: “There was a lot of controversy around [Ahn’s] appointment and how he interpreted KIC’s mission. Some say he was trying to move KIC to be more independent of BoK.

“But different people have different perspectives on whether he was doing the right or the wrong thing, and such appointments have complex dimensions. It is hard to draw conclusions. Some say he interpreted KIC’s mission very literally.”

At the end of 2014, KIC’s broad asset allocation was: stocks 43.8%, bonds 39.2%, alternatives 8%, and others 9%. Of the traditional elements of the portfolio, the fund has managed 73.2% internally and the rest using external managers.

A spokesperson for KIC was unavailable for comment as AsianInvestor went to press. Ahn could not be reached for comment.

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