KIC Holds Overseas Investment Council Meeting: "Focusing on Interest Income Is the Best Strategy"

Morgan Stanley "Bond Investment Should Focus on Interest Income"
US Mortgage-Backed Securities, Attractive Investment Opportunities

Korea Investment Corporation (KIC) announced on the 29th that it held the 45th meeting of the Public Institution Overseas Investment Council (Haetuhyeop) at its headquarters in Jung-gu, Seoul. Haetuhyeop is a consultative body established in 2014, led by KIC, to enable synergy among domestic public institutions in overseas investments.

Investment officers from pension funds, mutual aid associations, and central associations attended the meeting. Michael Kushma, Chief Investment Officer (CIO) of the Morgan Stanley Investment Management fixed income division, gave a presentation titled “Financial Markets in 2024 After the Interest Rate Hike Cycle.”

CIO Kushma stated, “Global inflation still exceeds central banks’ target levels,” adding, “Although interest rate cuts are expected this year, there remains significant uncertainty regarding the exact timing and magnitude of the cuts, making it difficult to predict the direction of medium- to long-term government bond yields such as the 10-year U.S. Treasury.” He continued, “From a long-term perspective, the current interest rate level, which allows for a real yield of over 2% on high-quality bonds, is quite attractive,” and emphasized, “The best strategy is to focus on interest income without taking excessive risks by betting on interest rate directions.” Specifically, he pointed to U.S. Residential Mortgage-Backed Securities (RMBS) as an attractive investment due to their high interest rates, relatively stable U.S. housing prices, and low loan-to-value (LTV) ratios.

KIC’s CIO, Lee Hoon, said, “The recent global economic outlook is characterized by coexistence of concerns over high interest rates and geopolitical conflicts and hopes for technological innovations such as artificial intelligence (AI),” adding, “It is more important than ever to consider mid- to long-term investment strategies based on rational analysis.” He also stated, “KIC will do its best to fulfill its role as a sovereign wealth fund by actively sharing investment information and know-how with domestic institutions and contributing to the development of the national financial industry.”