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KIC partners with Australian, Malaysian sovereign peers

Doug McTaggartSouth Korea’s sovereign wealth fund (SWF), the $25 billion Korea Investment Corporation (KIC), has signed cooperation agreements with Queensland Investment Corporation (QIC) and Malaysia’s Khazanah Nasional Berhad to share resources and pursue investments with the government-owned entities.

Don Lee, head of alternatives at KIC, said the Korean government supported the fund’s aim to build direct relationships with peer SWFs in order to access further investment talent and investment opportunities, including co-investments.

The non-binding agreements with the $51 billion QIC and $23 billion Khazanah, signed as memorandums of understanding, stated the intention of each investor to pursue mutually beneficial investments with the KIC across the globe.

“There is potential for co-investment opportunities, not only in our home countries but globally as well,” Lee said. “But at the moment we are just getting to know each other.”

He said that KIC had not committed to any specific investments with QIC or Khazanah.

QIC chief executive, Doug McTaggart, signed the agreement in Seoul last week, while Tan Sri Dato’ Azman, managing director of Khazanah, did so on the sidelines of the 2009 World Economic Forum on East Asia, of which he is a co-chair.

In a statement, Azman said the agreement aimed to lay groundwork for a “two-way investment flow” between the Malaysian and South Korean economies, encompassing co-investments and cross-border investments in private companies.

Since its 2005 inception, the KIC has been restricted to investing offshore. But the South Korean government was in the process of rewriting KIC’s investment mandate to permit to invest in the domestic economy, Lee said.

This followed public criticism of the fund at home for its $2 billion investment in Merrill Lynch last year.

Lee was demure on whether the KIC was tactically aligning itself with other sovereign investors to combat the clout of bigger funds, such as regional giants China Investment Corporation and Singapore’s GIC, but said the fund held relationships with other “prominent” SWFs and was discussing cooperation agreements with funds in the Middle East.

“KIC has been pursuing this direction, and we are looking to enhance our relationships with other SWFs.”

Meantime, the KIC had expanded its alternatives program to target private equity, venture capital and real estate, Lee said, and aimed to commit an overall allocation to alternatives of 20 per cent.

The team ran distinct teams to directly manage alternative assets and appoint and develop mandates with external managers.

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