KIC eyes more joint deals with sovereign funds-official

Thu Sep 9, 2010 2:29am BST

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* Partnership with other state funds seen as good for growth * Korea to lift real estate, hedge fund investments- official

By Ju-min Park

SEOUL, Sept 9 (Reuters) - South Korea plans to inject more than $5 billion into Korean Investment Corp (KIC) next year as the soverign wealth fund looks to extend overseas partnerships and boost investments, a government official said.

The $35 billion Korean fund, set up in 2005 to help manage assets entrusted by the government and the Bank of Korea, is one of the world's smallest state wealth funds. In comparison, China Investment Corp (CIC) has some $300 billion in assets.

"Partnering with big state funds will help us grow more quickly," the official told Reuters late on Wednesday.

"Together we also want to invest in the Korean market, which is currently not allowed due to regulations."

The official declined to be named because he was not authorised to talk to media.

He said the government also planned to increase investments in alternative assets such as real estate and hedge funds by $1.5 billion to 20 percent of its investment holdings.

A KIC spokesman on Wednesday said the fund is eager to team up with other state-run funds. He said he could not confirm whether KIC would receive more than $5 billion from the government next year.

KIC made headlines in 2008 after buying a $2 billion stake in Merrill Lynch. The U.S. bank's value later fell below its purchase price amid a global financial crisis that also saw the collapse of investment bank Lehman Brothers.

KIC agreed in July to invest $100 million dollars in a Chinese infrastructure fund led by Bank of China and Singapore state investor Temasek.

In June, KIC announced a $200 million investment in Chesapeake Energy Co (CHK.N), the U.S. No.2 natural gas company, along with CIC and Singapore state investor Temasek Holdings [TEM.UL] for an undisclosed amount. [ID:nTOE65K069]

Analysts say that sharing investments in overseas assets with other sovereign wealth funds is a low-risk strategy for state funds.

KIC posted a return of 18.7 percent in 2009, equivalent to about $4 billion, after losses of 13.7 percent in 2008. (Reporting by Ju-min Park; Editing by Dhara Ranasinghe)

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