Inside Korea's Sovereign Wealth Fund

Scott E. Kalb speaking at Seoul's Lotte Hotel on August 24, 2010. (Asia Society Korea Center)

SEOUL, August 24, 2010 - Asia Society Korea Center recently hosted a monthly luncheon lecture with professional investment specialist and professor-turned-government official Scott E. Kalb.

In his speech, entitled “Korea Sovereign Wealth Fund: Who We Are and What We Do," Kalb recapped his own experience in Korea over the past 30 years. Since his first visit to Korea in 1978 on a fellowship, Kalb has taught at a university and worked for the Korean government, after which he worked at many distinguished asset management firms before finally joined Korea Investment Corporation (KIC) to serve as its Chief Investment Officer in 2008. He introduced KIC as a government-owned institution, created in July 2005.

Structured as a corporation, KIC was initially funded with US$17 billion of foreign exchange reserves from the Bank of Korea with an additional US$3 billion from the foreign exchange stabilization fund of the Ministry of Finance and Economy. KIC manages a part of Korea’s foreign currency reserves on behalf of the Bank of Korea and assets of the Ministry of Finance and Economy through its Korea Sovereign Wealth Fund (KSWF), which has an estimated US$4 trillion in assets.

There are about 40 sovereign wealth funds all over the world and KSWF is ranked as the 19th largest. KSWF has invested US$28 billion into traditional assets such as bonds, stocks, and inflation-linked notes, one billion into alternative assets, and two billion into strategic investments. It also strives to create profit with efficient asset distributions and overseas investment into natural resources and energy.

Kalb pointed to an investment in private equity in a variety of sectors, especially in energy and natural resources, as an effective alternative strategy during the recent global financial crisis. He also emphasized the need for a return to basics in financial investment, and that the "golden rule" is diversification. He concluded by speculating that further opportunities will arise if and when the KIS invests more aggressively in private markets.