KIC recoups 40% of 2022’s loss on stock, bond gains

South Korea’s sovereign wealth fund reported a 7% year-to-date return on its total asset investments as of end-August

Korea Investment Corp.'s headquarters lobby (Courtesy of Yonhap)

Byeong-Hwa Ryu 2

2023-11-29 11:30:45 hwahwa@hankyung.com

Sovereign wealth funds

Korea Investment Corp. (KIC) posted a 7.12% return on total asset investments in the first eight months of this year, recouping about 40% of last year’s record loss of $27.9 billion, according to South Korea’s sovereign wealth fund on Wednesday.

Thanks to the gain, its total assets under management (AUM) added $12.1 billion from end-2022 to $181.4 billion as of the end of August this year.

The sovereign fund reported the largest-ever shortfall of $29.7 billion in total assets last year due to a plunge in its stock and bond investment value, resulting in its worst return since 2008, a 14.36% loss. Its annualized total return for last year also declined to 4.12% from 5.47% in 2021.

The latest recovery in its total asset value was mainly driven by gains in equity and bond investments.

The year-to-date return on stock and bond investments as of August stood at 15.29% and 1.11%, respectively, resulting in a return of 8.32% from traditional asset investments.

KIC will strive to recoup the remaining loss from last year with not only traditional asset investments but also alternative asset investments, especially more bets on infrastructure and private debts in a higher-for-longer interest rate environment, according to its Chief Executive Officer Jin Seoungho.

KIC Chief Executive Jin Seoungho speaks at ASK 2023 on Oct. 25

Jin said during the keynote speech of ASK 2023 last month that the state-run fund aims to increase its proportion of alternative assets from 22.8% as of end-2022 to 25% by 2025, as well as step up its direct investments and co-investments.

TRADITIONAL ASSETS OFFSET ALTERNATIVE ASSET LOSSES

KIC undisclosed the year-to-date return on alternative asset investments but revealed its annualized return on alternative investments since its first alternative investment dropped to 8.06% as of end-August from 8.23% as of the end of 2022.

Of alternative asset investments, the year-to-date return on private equity funds decreased to 9.83% from 9.88% over the same period, as well as real estate and infrastructure to 7.49% from 7.88%. The return on hedge fund investment inched up to 5.38% from 5.31%.

As of end-August, equities, bonds and alternative assets accounted for 39.6%, 30.7% and 22.7%, respectively, of KIC’s total assets. The remaining 7.0% are investments in other assets.

Established in 2005, KIC has received total deposits of $117.1 billion from the Bank of Korea and the Korean Ministry of Economy and Finance to run the country’s wealth fund.

Write to Byeong-Hwa Ryu at hwahwa@hankyung.com

Sookyung Seo edited this article.