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First entrusted with USD 1 billion in 2006, KIC has consistently expanded its operating scale through stable and capable management. Assets under management (AUM) at the end of 2022 totaled USD 169.3 billion.
Following a principle of diversification, KIC manages a portfolio that is 77.2% traditional assets and 22.8% alternative assets, including private equity, real estate, infrastructure and hedge funds.
The AUM of our alternative assets, which have a low correlation with traditional assets and capture an illiquidity premium through long-term investment, grew about 8% (USD 2.8 billion) from the previous year to USD 38.7 billion, accounting for 22.8% of the portfolio in 2022 compared to 17.5% in 2021.
| NAV | Weight | ||
|---|---|---|---|
| Traditional Assets | Equities | 64.9 | 38.3 |
| Fixed income | 53.4 | 31.6 | |
| Subtotal* | 130.6 | 77.2 | |
| Alternative Assets | Private equity | 16.0 | 9.5 |
| Real estate & infrastructure | 16.5 | 9.7 | |
| Hedge funds | 5.7 | 3.3 | |
| Subtotal* | 38.7 | 22.8 | |
| Total | 169.3 | 100.0 | |
The subtotals include other assets such as inflation-linked bonds and cash.
Our alternative assets grew by about 7.8% (USD 2.8 billion) from the previous year to USD 38.7 billion, accounting for 22.8% of the total portfolio, up 5.3% from the previous year.
The outbreak of the Russia-Ukraine War in February 2022 and the prolonged nature of the crisis exacerbated supply chain bottlenecks, which led to sharp rises in commodity, energy and food prices and higher inflation than expected. The U.S. Consumer Price Index (CPI) soared to 9.1% and the U.K. CPI to 11.1% year-over-year, recording the highest inflation rates since the 1980s.
Amid these inflationary concerns and supply chain crises, the U.S. Federal Reserve’s seven sharp rate hikes throughout the year led to increased uncertainty and volatility in financial markets.
In particular, the U.S. benchmark interest rate increased by 4.25% points over the course of a year after the beginning of 2022, which contributed to the deterioration of the real economy and significantly increased the likelihood of a global recession.
Moreover, the slowdown in China’s economic growth due to lockdowns under the country’s “zero-Covid” policy and the spread of real estate insolvency risks also increased uncertainty in the global financial markets and cooled investor sentiment.
As a result, in 2022, global stock prices fell 19.8% (MSCI World Index) and bond prices fell 16.2% due to rising sovereign debt rates around the world. It was the first time since the 1990s that the two asset classes, which normally allow for diversification due to their negative correlation, recorded double-digit declines at the same time, causing substantial turmoil in financial markets.
Despite KIC’s proactive risk hedging efforts during this complex financial crisis and the fact that alternative assets, which KIC continued to expand, helped protect portfolio returns, the overall decline in asset prices resulted in an annualized total asset return of -14.36% in 2022, with total assets dropping to USD 169.3 billion.
(USD billion)
| 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|
| NAV | 131.6 | 157.3 | 183.1 | 205.0 | 169.3 |
| Cumulative net investment income since establishment | 29.0 | 49.2 | 71.0 | 87.9 | 58.2 |
KIC’s return on total assets in 2022 stood at -14.36%, with a five-year annualized return of 3.39% and an annualized return since inception of 4.12%.
(%)
| 2018 | 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|---|
| Return on total assets (before fees) | -3.66 | 15.39 | 13.71 | 9.13 | -14.36 |
| Return on total assets (after fees) | -3.80 | 15.21 | 13.52 | 8.94 | -14.46 |
| Annualized return since inception | 3.76 | 4.60 | 5.22 | 5.47 | 4.12 |
The return on traditional assets in 2022 was -17.58%, -52 bps compared to the benchmark.
(%)
| 2018 | 2019 | 2020 | 2021 | 2022 | Annualized return for the past 5 years (’18-’22) |
Annualized return since inception |
||
|---|---|---|---|---|---|---|---|---|
| Total | Return | -5.64 | 16.62 | 14.62 | 6.75 | -17.58 | 2.10 | 4.06 |
| Excess return (bp) | -81 | 33 | 144 | -39 | -52 | -6 | 16 | |
| Equities | Return | -9.55 | 27.52 | 19.16 | 18.61 | -19.27 | 5.65 | 4.56 |
| Excess return (bp) | -71 | 6 | 261 | -92 | -137 | -21 | -12 | |
| Fixed income | Return | -1.32 | 7.53 | 9.88 | -4.62 | -16.65 | -1.51 | 2.36 |
| Excess return (bp) | -13 | 73 | 78 | 39 | 14 | 36 | 32 | |
Annualized return since inception: 8.23%
(%)
| Inception | Annualized return since inception | |
|---|---|---|
| Private equity | 2009. 09. 16 | 9.88 |
| Real estate & infrastructure | 2010. 03. 15 | 7.88 |
| Hedge funds | 2010. 01. 29 | 5.31 |
| Alternative asset total* | 8.23 |
* Total includes commodities (categorized as traditional assets since April 2011)
| Asset class | Type | Benchmark |
|---|---|---|
| Traditional Assets | Equities | Morgan Stanley Capital International All Country World Index ex Korea (unhedged) |
| Fixed income | Bloomberg Barclays Global Aggregate Index ex KRW ex Korea (unhedged) | |
| Inflation-linked bonds | Bloomberg Barclays Global Inflation-Linked Bond Index | |
| Cash | ICE BofA Merrill Lynch 3-Month US Treasury Bill | |
| Alternative Assets | Private equity | Morgan Stanley Capital International All Country World Index ex Korea (unhedged) + 2%, 3 months lagged |
| Real estate & infrastructure | G7 inflation rate + 4%, 3 months lagged | |
| Hedge funds | BofA Merrill Lynch 3-Month US Treasury Bill + 3.5%, 1 month lagged |
