[Editor's Note] Korean investors gearing up to boost overseas alternative assets
May 24, 2016 (Gmt+09:00)
“Only free lunch in finance is diversification.”
Korean institutional investors, who have seen their assets under management (AUM) snowball for the last 10~15 years, are in the process of understanding and replicating this simple, yet most important, principle of the modern portfolio theory. As correlation between stock and bond prices has increased since the 2008 financial crisis, Korean asset owners have tried to boost their exposure to alternative asset classes.
Implications to the global investment community? Huge. The National Pension Service (NPS) alone should allocate a further $80 billion to alternative asset classes through 2021 to meet its “mid-term asset allocation plan.” The Korea Investment Corporation (KIC) aims to increase the portion of alternative investments to 20% of its portfolio by the end of 2020, which means it has to invest at least $7 billion in offshore alternative assets like private equity, hedge funds, real estate and infrastructure over the course of next four years.