New KIC chief pledges to increase PE exposure

Chong-Suk Choi, the newly appointed head of South Korea's sovereign wealth fund, plans to increase allocations to alternative investments including private equity.

Sovereign wealth fund Korea Investment Corporation (KIC) has appointed Chong-Suk Choi as its president and chief executive. He replaces Young-wook Chin, who has completed his three-year term.

According to newswire Reuters, Choi said in his inauguration speech that KIC will increase strategic and alternative investments and act as an anchor for overseas investments by Korean firms. He said the fund must increase the proportion of strategic and alternative investments in its portfolio and pledged to strengthen ties with foreign private equity and pension funds.

“Rising commodity prices, the emerging strategic importance of particular regions and capital resettlement due to volatile financial markets provide favourable opportunities for sovereign wealth funds,” Choi was quoted as saying.

KIC's new chief executive, who is the son of ex-South Korean president Kyu-hah Choi, has a private sector background with experience at Allianz Global Investors Korea, Hana Bank and Korea Exchange Bank.

As of 31 December last year, KIC had assets under management of about $37 billion, with 5.8 percent invested in alternative assets, according to its 2010 annual report.

Having begun investing in private equity and real estate in 2009, the Korean sovereign wealth fund expanded the scope of alternative investment to hedge funds in early 2010. KIC is understood to have continued to increase the commitment of capital to these areas.

“The global financial crisis of 2008 presented an opportunity to acquire healthy assets at low prices. Seizing this opportunity, we achieved solid returns by focusing mainly on distressed debt and secondary strategies. In 2010, we expanded our private equity investments into traditional buyout and growth strategies,” the report said.

“Private equity is classified as a growth driver for returns in our portfolio and provides opportunities to capture higher risk premiums associated with illiquid investments,” the report added.