Korea’s public pension and wealth fund uncovering new opportunities

South Korea’s two major institutional investors plan to use the volatile financial momentum to discover new investment opportunities such as leveraged private equity and infrastructure assets.

Most of the investment assets are declining due to the prolonged Russia-Ukraine war, inflation and interest rate hikes but wisdom is needed to find strategies and ways to overcome the current situation, according to head of the National Pension Service and Korea Investment Corp.

“The global investment environment is facing a multiple crisis of inflation, high interest rates and low growth,’’ said Kim Tae-hyun, chairman of the National Pension Service, at a event co-hosted by Maeil Business Newspaper and the European Chamber of Commerce in Korea on Thursday. “If you think the current situation as a crisis, it will be a crisis. But if you see it as an opportunity, it will be an opportunity,’’

“We are seeking investment opportunities in assets that can contribute to post-crisis improvement in profits to cope with the changing environment.’’

Of the total 917 trillion won ($683 billion) NPS is managing, about 43 trillion won is in the property market at the end of June.

On private equity market, Kim said that market price is being adjusted as M&A activities have weaken as well as the public offering market. NPS plans to seek opportunities on secondary strategy that focuses on floating-rate senior loans for private equity loans and acquire private equity assets that have already invested at revised prices, Kim said. NPS manages 56 trillion won in the private equity fund.

Korea Investment Corp.’s Chief Executive Officer Jin Seung-ho also stressed the need to find investment opportunities during the difficult times on the global financial and investment scene.

“KIC is maintaining a strategy of gradually increasing the proportion of alternative investments that can secure a portfolio diversification as well as illiquidity premium,” Jin said. “We want to use it as an opportunity to secure high-quality alternative assets at low prices through selective investments.’’

On private equity investment, Jin also said that KIC is interested in expanding secondary strategies.

Jin said that infrastructure and hedge funds are noteworthy investment areas in the current inflationary and volatile environment. “We are interested in telecommunications infrastructure such as data centers, fiber cable and telecom towers. We will continue to expand investments in green infrastructure, renewable energy and transport infrastructure.”

On hedge funds, Jin said they continue gain interest in a volatile market and it will continuously rebalance so that its hedge fund portfolio can create stable performance with medium risk and medium returns.