Another SWF comes on board(4)

South Korea’s $25 billion sovereign wealth fund Korea Investment Corporation (KIC) has brought cheer to at least one GP so far as it follows other Asian sovereign wealth funds like China’s National Social Security Fund and the Government Pension Fund of Thailand in making a first foray into private equity.

In June, the Korean government decided to inject $3 billion into KIC. Of this amount, $1 billion will be invested in alternatives such as private equity, real estate and infrastructure, Sang Joon Kim, head of investment strategy at KIC, said in an interview. The investment firm is currently pursuing investments across a variety of strategies, Kim said, though it is too early to determine how the $1 billion will be split between them.

News of sovereign wealth funds such as KIC, which is the South Korean government’s vehicle for investments overseas, venturing into private equity has no doubt heartened GPs around the world at a time when fundraising is extremely difficult. These funds possess large pools of capital and – perhaps more importantly – their appetite for private equity is not affected by short-term liquidity constraints.

As if to vindicate the point, Kim says that many private equity firms have already approached KIC for commitments. However, the fund has not planned many investments just yet and says it intends to tread into the asset class conservatively – it is still deciding upon the structure of its private equity portfolio.

One firm to benefit quickly from the injection of capital is Swiss alternative asset manager Partners Group, which was awarded an undisclosed private equity secondaries mandate in July. KIC said at the time that it intended to take advantage of the high discounts to net asset value currently seen in the secondaries market.

KIC has also signed separate memorandums of understanding with Queensland government-owned QIC, an institutional investment manager with assets of A$65 billion ($52 billion), and Malaysian sovereign wealth fund Khazanah Nasional, to expand cooperation and to jointly pursue investment opportunities. This will be done by pooling expertise and resources with the two firms.

Kim is tight-lipped about the scope of the collaboration with the Malaysian and Australian sovereign investment firms, saying merely that the agreements are pertaining to possible co-investments, and that no concrete agenda has been set as yet.

In recent months, this magazine has often spoken about the need for a larger base of Asian limited partners. It looks like the region has found one more that could go on to become a key investor in the asset class.