Korean sovereign fund to double private markets bets

Korea Investment Corporation, a $35 billion sovereign wealth fund, plans to double its allocation to private markets, including distressed debt and real estate, to 20 per cent over the next five years.The plan was foreshadowed in a speech in Seoul last week by the fund’s CIO, Scott Kalb, and reported by Reuters news service.

Kalb, who joined the fund only last year from the private funds management sector at Black Arrow Capital Management, Tudor Investment Corp and Citigroup, is quoted as saying: “Right now is the time to go into private markets. Risk premiums on illiquid investments are becoming attractive.”

As of June, the fund’s asset allocation was 49 per cent bonds, 41 per cent listed equities and 10 per cent private markets.

Kalb said he thought it was not necessarily the right time to go into leveraged buyout or venture funds and did not expect to see any further rallies in the bond markets.

“If I were a bond manager I would retire today,” he was quoted as saying. “We expect lower returns for fixed income and equities over the next few years as the financial system undergoes repair.”

KIC’s assets are expected to grow by between $5 billion and $10 billion a year, so the increased allocation to private markets could easily be funded by cashflow.