If alternatives are one answer to achieving better risk-adjusted returns for Korea Investment Corp., the more dynamic, tactical approach to asset allocation it adopted in 2012 is another effort that could make a growing contribution in coming years, said Dong-Ik Lee, chief investment officer.
While conceding that such an approach is a mix of “art” and “science,” Mr. Lee said KIC's initial results in responding to market opportunities — such as his team's decision to hedge a significant portion of the portfolio's yen exposure late last year as then-candidate Shinzo Abe was pledging drastic stimulus measures to revive Japan's economy — have been encouraging.
It comes down to whether KIC's investment team can add value to the portfolio, said Mr. Lee.
During the current year, that strategic tilting approach has led KIC's investment team to shift more assets into publicly listed equities from fixed income, he said.
KIC's latest annual report cited the sovereign wealth fund team's efforts to develop a proprietary model “for analyzing and predicting global economic and financial market conditions,” to enhance KIC's ability to “proactively respond” to a constantly changing environment.
Mr. Lee said work on that proprietary model remains ongoing.
