The $65 billion Korea Investment Corp. has added about $3 billion in alternatives investment this year, putting the sovereign wealth fund half-way toward its goal of lifting private equity, real estate and hedge fund allocations to 20% of its portfolio.
Dong-Ik Lee, KIC's chief investment officer, said his team has made significant progress this year toward hitting that 20% target over the next few years.
From the alternatives program's launch in the second half of 2009 through the end of 2012, those allocations remained at roughly 5% to 6% of KIC's overall assets, coming in at $3.5 billion, or 6.1%, of a portfolio valued at $56.6 billion as of Dec. 31, 2012.
Currently, on the basis of capital that has actually been drawn down, alternatives strategies account for 10% of what now is about a $65 billion portfolio, Mr. Lee said in an Oct. 4 interview.
Another 2% to 3% has been committed to alternatives strategies, but not yet drawn down, he said.
With low fixed-income yields at home and abroad leaving bond allocations vulnerable to losses if interest rates rise, a greater reliance on the mix of yield and uncorrelated returns offered by alternatives strategies is inevitable, said Mr. Lee.
At the end of 2012, hedge funds claimed the biggest share of KIC's alternatives allocations with 39% of the pie, followed by 31% for private equity, 26% for real estate and 4% in cash. While KIC's ongoing boost in alternatives allocations will remain well distributed, it will tilt more toward private equity, Mr. Lee said.