Korean sovereign wealth fund KIC logs record loss in 2022

Its annualized return was -14.4% amid the poor performances of equities and bonds

Korea Investment Corporation headquarters lobby (Courtesy of Yonhap)

Byeong-Hwa Ryu and Jin-Gyu Kang 1

2023-02-15 15:47:18 hwahwa@hankyung.com

Sovereign wealth funds

Sovereign wealth fund Korea Investment Corporation (KIC) posted the largest annual loss last year since its inception in 2005, according to its 2022 earnings report.

The fund saw a record shortfall of $29.7 billion last year due to poor performance of equities and bonds. The annualized return was negative 14.4%, the worst percentage since 2008.

KIC’s cumulative profit plunged 34% to $58.2 billion as of end-2022 from $87.9 billion a year ago. Its asset under management (AUM) of $205 billion, the world's 14th-largest for a sovereign wealth fund as of end-2021, dropped to $169.3 billion as of end-2022.

Traditional assets were heavily hit last year – losses on equities and bonds were 19.3% and 16.7%, respectively. Between 2018 and 2022, the annualized returns of equities and bonds were 5.7% and negative 1.5%, respectively.

Alternative investments outperformed traditional ones. Private equity and real assets showed 14.7% and 7.6% returns over the past five years. Hedge funds achieved a 4.8% return during the same period.

As of end-2022, KIC allocates 38.3%, 31.5% and 22.9% of its assets to equities, bonds and alternative investment, respectively. The fund increased exposure to alternative investment by 540 basis points last year, while reducing it to traditional assets by 230-340 basis points.

Write to Byeong-Hwa Ryu and Jin-Gyu Kang at hwahwa@hankyung.com

Jihyun Kim edited this article.