KIC set to expand team, gears up for more assets

Korea Investment Corporation (KIC) has embarked on a drive to hire more alternative asset specialists as it seeks to bulk up its investment capabilities.

The development comes as the sovereign wealth fund, which had $134 billion in assets at the end of 2017, inked an agreement with Korea Post, which, according to industry experts, could lead to KIC eventually managing a portion of the overseas investments of Korea Post's savings and insurance arms.

The recruitment drive, which started in February, is primarily aimed at specialists who have expertise in real estate, infrastructure and private equity. It is currently seeking to hire up to 13 experts in total, according to the job vacancies advertised on its website.

The ongoing drive underlines a serious intent by the fund to upgrade its investment capabilities following a bout of restructuring of the investment team, noted a senior executive at an advisory firm based in Hong Kong and familiar with the working of KIC’s investment division.

He told AsianInvestor that earlier this year, the team managing infrastructure and real estate investments had been split into two. Now, the fund is seeking to expand the separate teams, he added.

The investment team already has separate heads for various assets classes such as equities and bonds. Kang Shinwoo is head of the alternatives group with the title of chief investment officer, and it has about 33 employees working across different asset classes, according to KIC’s website.

“They are looking for good investment professionals, so they are developing their investment structure in a positive way to attract market professionals,” the executive, who spoke on condition of anonymity, told AsianInvestor.

“Targeting candidates with experience of three years and above, they are hiring quite junior or younger people. So they are [trying to] inject new investment professionals, and not simply replacing seniors.”

ALTS EXPERTISE

The wealth fund started investing in alternative assets in 2009, starting with private equity and then moving into real estate, infrastructure and hedge funds.

At the end of 2017, the asset owner had roughly 14%, or $19.3 billion, invested in alternatives. The alternatives portfolio generated an annualised return of 7.3% since inception.

Its eight-member real estate team is headed by managing director Huh Jeayoung. The infrastructure team, including managing director Kim Chung Keun, has five members, while the private equity team, overseen by managing director Kim Jongho, consists of 10 specialists.

Additionally, an eight-member team dedicated to alternative investment strategies is led by  Suh Ikho.

KIC did not respond to AsianInvestor queries for more details on the current hiring drive.

The growth in KIC’s alternative assets has occurred along with a growth in overall assets under management over the years. That trend seems set to continue as KIC gears up to manage money from more Korean state-run entities.

When KIC was established in 2005, a lion’s share of capital that needed to be managed came from the Ministry of Finance and Bank of Korea. In 2019, it will add a third entity to that list.

On February 21, KIC signed a memorandum of understanding with Korea Post to co-operate on investments, according to a statement by the SWF. Sejong city-headquartered Korea Post falls under the Ministry of Science and Information and Communications Technology.

“As part of efforts for Korea Post to allocate part of global investment assets to KIC, both agencies agreed to discuss details during the first half of this year, including the manner in which joint investment and asset allocation will be made,” KIC said in the statement.

No further details were provided in the release. KIC did not respond to AsianInvestor queries on details of what asset classes could be included in the co-operation or how much money KIC would manage.

MONEY MANAGEMENT SKILLS

According to a Hong Kong-based investment adviser who works with Korean institutional investors, KIC has strong expertise in managing overseas investments, which makes it a very attractive money manager for state-run entities that are keen on investing overseas but don't necessarily have the expertise to do so, particularly in specific markets and asset classes.

Furthermore, KIC and Korea Post will also seek synergies by cooperating in investment-related training, research and other sectors. The statement did not specify which areas of investments will be discussed as part of the KIC-managed mandate.

The investment adviser, who declined to be named, pointed out that KIC does have a mandate to engage with the government and public entities on how the SWF can best offer its expertise in overseas asset management.

The AUM of many institutional asset owners in Korea is growing rapidly, engendering a need for them to diversify both locally and overseas, the adviser added.

Indeed, some institutions, such as Korea Teachers Pension and Korea Teachers Credit Union, have expressed a desire to lift their overseas allocations.

“Investors need a specialist who understands and has experience in overseas investing. I think KIC has significant capabilities and experience in these markets,” the adviser said, adding that the wealth fund seems to be a preferred manager for government agencies.

Korea Post has $111 billion in assets under its savings and insurance arms. The investor also has a team dedicated to overseas investments but typically appoints mandates to managers with local presence in targeted overseas markets.

It recently selected three asset managers – UBS, Invesco and Fidelity – to diversify into Chinese stock markets, according to local Korean media reports. It plans to allocate a total of $150 million among the three management firms. That local-presence manager strategy is likely to be complemented with the tie-up with KIC.

As of now, there is no indication that the KIC pact means Korea Post will stop issuing mandates in any particular asset class, the investment adviser added.

For further insights on how Korean Institutional investors are further internationalising and diversifying their portfolios, look out for AsianInvestor's 13th Institutional Investment Forum in Korea on April 10.