[Institution Perspective] KIC Investment Officer Flown to Abu Dhabi... Meeting with UAE's Top 3 Sovereign Wealth Funds

KIC Head of Investment Management Visited Abu Dhabi Last Month
Met Consecutively with CEOs and CIOs of Abu Dhabi Investment Authority, Mubadala, and Abu Dhabi Development Holding Company

The Chief Investment Officer of Korea Investment Corporation (KIC), South Korea's sovereign wealth fund, visited the three major sovereign wealth funds of the United Arab Emirates (UAE) to discuss investment cooperation and management strategies between the two countries.

According to the public institution management information disclosure system Alio on the 7th, Lee Hoon, Head of Investment Management at KIC (CIO), visited Abu Dhabi, the capital of the UAE, for five days from the 21st to the 25th of last month. During his visit, he met consecutively with the Chief Executive Officers (CEOs) and Chief Investment Officers (CIOs) of Abu Dhabi Investment Authority (ADIA), Mubadala, and Abu Dhabi Developmental Holding Company (ADQ).

UAE Promises $30 Billion Investment in Korean Companies... Discusses Investment Cooperation with Three Sovereign Wealth Funds

Since President Yoon Suk-yeol's visit to the UAE last year, the UAE has actively promoted investment in Korea, promising $30 billion worth of investments in Korean companies. In May last year, sovereign wealth funds from Abu Dhabi, including ADIA, Mubadala, and ADQ, directly visited Korea. Currently, investment reviews totaling $2 billion are underway for Korean companies. Priority investment sectors include energy, information and communication technology, agricultural technology, biotechnology, aerospace, and K-culture.

During this trip, CIO Lee discussed key issues in the financial market and asset management strategies. He also held meetings with key investment personnel from global infrastructure management firms and shared insights on the current status, outlook, and investment strategies of infrastructure markets in emerging countries, including the Middle East. Experts expect that Korean companies and sovereign wealth funds may jointly participate with Middle Eastern sovereign wealth funds in local renewable energy infrastructure investments such as solar and wind power or hydrogen-related infrastructure, or pursue joint entry into third countries.

The UAE, which has abundant finances from oil exports, actively manages its funds through sovereign wealth funds by investing overseas. It is conducting active overseas investments to diversify its oil-centered industries. The UAE shows strong interest in mergers and acquisitions (M&A) or equity investments in startups and advanced technology overseas companies.

The UAE has seven massive sovereign wealth funds each managing assets exceeding $10 billion, ranking it as the third-largest sovereign wealth fund holder globally. The country is divided into seven Emirates, and each sovereign wealth fund belongs to a specific Emirate. The three sovereign wealth funds visited by CIO Lee all belong to the Abu Dhabi Emirate.

Among them, the largest, ADIA, had assets under management of $790 billion (approximately 1,050 trillion KRW) as of the end of the year before last, ranking first in Abu Dhabi and third globally. It operates with 100% overseas investments and generally prefers safe investments. ADIA acquired the Namsan State Tower in Hoehyeon-dong, Jung-gu, Seoul, for 503 billion KRW in August 2014 and sold it for 580 billion KRW in 2019.

Mubadala currently maintains the closest exchanges with the Korean government. The Financial Investment Support Group, which is in charge of economic cooperation with the UAE within the Ministry of Economy and Finance, and the Korea Development Bank mainly cooperate with Mubadala. Last year, a 'Korea Investment Dedicated Team' was also established within Mubadala. Mubadala manages assets worth $243 billion (approximately 321 trillion KRW), ranking second in Abu Dhabi and twelfth globally. Mubadala participated in Nexen Tire's third-party allotment rights offering in 2017 and acquired Hugel last July in a consortium with GS Group. It also signed a memorandum of understanding (MOU) with Hyundai Motor at the end of last year to jointly explore new businesses in future cars and hydrogen sectors. ADQ, the third-largest sovereign wealth fund in Abu Dhabi, manages assets worth $157 billion (approximately 207 trillion KRW) and focuses on energy, power, water, healthcare, pharmaceuticals, transportation, food, agriculture, finance, real estate, and ICT sectors.

Strong Performance with 11.6% Return Last Year... Efforts to Discover New Investment Opportunities

KIC earned about 12% profit last year, mainly from stocks and bonds. The annual total asset return in US dollars was recorded at 11.6%. As of the end of last year, total assets under management (AUM) stood at $189.4 billion (approximately 244 trillion KRW), an increase of $20.1 billion (approximately 26 trillion KRW) from the previous year ($169.3 billion).

Returns on traditional assets (stocks, bonds, etc.) at 14.3% exceeded the overall average, with stock returns particularly high at 22.4%. Last year, the global stock market saw increased investment in IT and communication services centered on artificial intelligence (AI), driven by strong consumption in major countries like the US and rising expectations for a soft economic landing. KIC also invested mainly in technology stocks and developed markets such as the US, Europe, and Japan, achieving favorable stock returns.

The bond sector recorded a 6.3% return. The bond market showed high volatility, with the US 10-year Treasury yield rising from 3.3% to 5% during the year before falling back to 3.8%. KIC achieved stable returns by anticipating price stability and a downward stabilization of interest rates.

Alternative investment assets such as private equity, real estate, infrastructure, and hedge funds have delivered solid long-term investment performance despite a tightening liquidity environment. The recent five-year annualized return for alternative assets stands at 8.6%. Since starting alternative asset investments in 2009, the cumulative annualized return until the end of last year is 7.8%. The five-year annualized returns by asset class within alternatives are 13.5% for private equity, 5.5% for real estate and infrastructure, and 5.7% for hedge funds.

KIC is gradually increasing its allocation to private debt, where investment opportunities are expected to rise due to increasing loan interest rates, and infrastructure investments benefiting from mid- to long-term energy transition and digitalization. Additionally, it is focusing on discovering new partners such as venture capital (VC) and private equity funds (PEF).