[2023 Alternative Investment Forum] KIC "Expanding Secondary Investments... Defensive Investment in Economy"

Korea Investment Corporation (KIC) plans to expand secondary investments and seek defensive investment opportunities in response to an investment environment fraught with uncertainty and complex risks.

On the 4th, Cho Beom-rin, Senior Managing Director of KIC's Alternative Investment Headquarters, stated during a keynote presentation at the '1st Asia Economy Alternative Investment Forum' held at the Conrad Hotel in Seoul, "Due to the denominator effect experienced by institutional investors, demand for portfolio adjustments using secondary transactions is increasing," adding, "A favorable investment environment is unfolding, with price discounts being observed."

Here, the denominator effect refers to the phenomenon where the prices of stocks and bonds previously invested in by pension funds or public funds decline, increasing the proportion of alternative assets such as real estate within the investment portfolio. Secondary investment refers to transactions where existing investment assets, such as equity stakes held by private equity (PE) or venture capital (VC) firms, are sold to other private equity funds to liquidate those assets. KIC is exploring appropriate investment opportunities based on the analysis that investors needing to recover existing investment funds will offer high-quality investment assets at discounted prices in the secondary market.

Jobeomrin, Senior Deputy Director of the KIC Alternative Investment Headquarters, is giving a presentation on "Global Alternative Investment Trends and KIC's Asset Allocation Strategy in the Era of High Interest Rates" at the 1st Asia Economy Alternative Investment Forum held at the Conrad Hotel in Yeouido, Seoul on the 4th. Photo by Hyunmin Kim kimhyun81@

In the private equity sector, KIC plans to selectively review investments in defensive companies with solid business models and healthy cash flows, considering the investment environment characterized by high interest rates, inflation, and economic uncertainty. Cho said, "On the direct investment side, we plan to seek quality co-investment opportunities by leveraging the capital needs of fund managers facing prolonged fundraising periods." He also mentioned, "On the indirect investment side, we view distressed investments?those managing non-performing or potentially non-performing assets?as opportunities."

In real estate investment, reflecting market conditions such as high interest rates and polarization, KIC plans to proceed with real estate loan investments and selective investments in core assets. Senior Managing Director Cho stated, "We will seek selective new investments and review investment opportunities based on conservative assumptions." He added, "We will focus investments on sectors with favorable growth prospects while diversifying investment strategies and regions." KIC intends to secure investment opportunities in sectors expected to benefit from the expansion of the e-commerce market and the transition to a digital society. Market research and exploration of investment opportunities will be conducted in new sectors such as self-storage, life science offices, and senior housing.

In the infrastructure sector, for core asset classes, considerations include whether the asset holds market dominance and whether it is symbolic in terms of scale and quality. Amid the trend of expanding the scope of infrastructure asset classes, whether the asset has reached a certain level of market and technological maturity will also be an important investment decision criterion. Cho hinted, "The infrastructure secondary market is expected to grow at an annual rate of 40% until 2025, and we will seek to sophisticate secondary investment forms in response."

Jobeomrin, Senior Deputy Director of KIC Alternative Investment Headquarters, is giving a presentation on "Global Alternative Investment Trends and KIC's Asset Allocation Strategy in the Era of High Interest Rates" at the 1st Asia Economy Alternative Investment Forum held on the 4th at Conrad Hotel in Yeouido, Seoul. Photo by Hyunmin Kim kimhyun81@

In the private debt sector, he mentioned, "We plan to build a portfolio centered on top-tier managers with proven crisis response capabilities." He noted, "Although the market environment offers the potential for high returns, verifying the crisis management capabilities for problematic assets is a priority." Furthermore, he emphasized, "Due to the long period of quantitative easing in the past, the importance of due diligence on portfolio construction and management capabilities, which were not differentiated among managers, as well as workout team capabilities, has increased."

This content was produced with the assistance of AI translation services.