Korea and Abu Dhabi funds signal future co-investments

The South Korean Government has teamed with Abu Dhabi’s largest sovereign wealth fund, the $627 billion Abu Dhabi Investment Authority (ADIA), to jointly pursue future investment opportunities.

The alliance could see the state-backed funds of South Korea, the $269.7 billion National Pension Service (NPS) and the $30 billion Korea Investment Corporation (KIC), co-operate with ADIA in investment deals.

Reuters Africa reported the agreement was made as Ahn Chang-kuk, an official at the South Korea’s Presidential Council for Future and Vision, signed a memorandum of understanding with the Abu Dhabi Government recently to secure partnership rights to developing oil fields.

The deal also allows ADIA to invest through a domestic brokerage in South Korea.

For the NPS, the accord is aligned with its aim of investing more assets globally. The big pension fund dominates its home equities and fixed-income markets. For instance, listed South Korean companies have a combined market capitalisation of just over 1,000 trillion won, limiting the NPS’ opportunities at home.

Recently, Top1000 Funds reported that the NPS aims to invest $23 billion in offshore markets this year as it diversifies from its home market.

The fund’s long-term strategic asset allocation will see more than 20 per cent of its assets invested in domestic equities, and 10 per cent in alternatives by 2014.

The fund aims to raise its level of offshore investment from 9.8 per cent of assets in 2010 to 12.6 in 2011, and 30 per cent in 10 years’ time.