(Reuters) – Korea Investment Corp (KIC), South Korea’s $35 billion sovereign wealth fund, plans in the next five years to double the proportion of its funds in private market investments such as distressed debt and real estate to 20 percent.
“Right now is the time to go into private markets,” Scott Kalb, KIC’s chief investment officer, said at a speech in Seoul Tuesday. “Risk premiums on illiquid investments are becoming attractive.”
KIC invests wholly outside the country. It has generated a return of 11.5 percent as of July 30 since it was established about five years ago from funds given to it by the government and central bank.
As of June the fund had 10 percent of its investments in private market investments, versus 49 percent in bonds and 41 percent in stocks. Kalb expects the fund’s assets under management to grow between $5 billion and $10 billion annually.
Kalb did not see the time as right to invest in leveraged buyout or venture capital funds and was sceptical of further rallies in bond markets with interest rates near record lows.
“If I were a bond manager I would retire today,” he said. “We expect lower returns for fixed income and equities over the next few years as the financial system undergoes repair.”
Kalb joined Korea Investment Corp. in April 2009 after working for Black Arrow Capital Management, Tudor Investment Corp. and Citigroup.
(Reporting by Brett Cole; Editing by Jonathan Hopfner)