South Korea's $200 billion sovereign wealth fund plans to boost investments in Silicon Valley startups as it looks to the metaverse and artificial intelligence to accelerate its expansion in alternative assets.
Seoungho Jin, who took over the reins of Korea Investment Corp. in mid-2021, also has his eyes on hotels, which he sees as a good play on the global recovery from the coronavirus pandemic.
Mr. Jin is looking beyond the recent downturn in listed technology stocks and the wider risks to the sector this year from the Federal Reserve driving interest rates higher. He sees alternative assets accounting for about 25% of KIC's portfolio by 2025, vs. around 17% last year, and assets under management eventually rising to $300 billion.
"Some investors say Silicon Valley is already saturated, which I have to concede is partly true, but it is still a source of global growth," Mr. Jin, 59, said in an interview in Seoul. "There are still plenty of good opportunities, if you chase them eagerly."
KIC has almost doubled in size over the past five years, after a slow start when it was created in 2005 to increase national wealth and contribute to the nation's finance industry. The fund, which only invests outside of South Korea, has yet to release its results for 2021.
Mr. Jin expects to add to head count in the fund's San Francisco office in this year to explore investments in tech, health and green ventures in Silicon Valley. He didn't offer details on any specific investments.
The metaverse concept that is dominating attention there is for an immersive version of the internet, where everyone can interact, play games and complete tasks as a digital avatar, using tools like virtual or augmented reality goggles.
KIC is also putting more money into tech shares, while evaluating opportunities in financial stocks, which may benefit from higher interest rates, he said.
In a wide-ranging interview with Bloomberg, Mr. Jin also said:
- KIC will continue to seek investments in real estate, including hotels, which should benefit as travel increases.
- The fund's allocation to alternative assets, including private equity and hedge funds, will increase by about 2 percentage points in 2022.
- Fixed-income assets will be trimmed by around 3 percentage points this year as global monetary policy normalizes. Equities holdings will increase slightly.
- KIC is looking at floating-rate notes or other debt products that could hedge against rising interest rates.
- Indian bonds look attractive among emerging market debt amid relatively firm corporate earnings and a good investment environment.
- KIC has employed more quantitative strategies recently and given its expectation for market volatility it will add more staff in this area
- It has also created a team for ESG, which is being factored into all investment decisions, and plans to increase staff in this area.
