Scott Kalb first went to Korea in 1978 on an academic scholarship and fell in love with the place. So, he stuck around. He learned the language. And, in the ’80s, he took a job at the Korean Ministry of Finance. However, he would eventually return to the US to do an MA at Harvard, which would propel him to Wall Street for a career in high finance. Yadda yadda yadda. He’s now the CIO of Korea’s $37 billion SWF, the Korea Investment Corporation, and is widely perceived as a creative and innovative force within the SWF community. Since taking over the CIO role in 2009, he’s revamped the SWF’s investment strategy, changed its asset allocation, and worked to improve the fund’s in-house capabilities.
In short, Scott Kalb is an interesting guy, so when he starts talking to the press, I tend to pay attention. And, notably, he’s been talking to two Bloomberg reporters this week, Tomoko Yamazaki and Komaki Ito, about the KIC’s ongoing development. In continuing the ‘deep thoughts by…’ series, here are some of the highlights:
Kalb on the fund’s ongoing cooperation and joint-investments with other SWFs:
“We are in discussions with our counterparts, sovereign wealth funds all over…We have already looked at a number of transactions together and we’re looking at some that are pending — our end goal there is to wind up having a diversified strategic portfolio in a variety of sectors and countries.”
Bloomberg reporting what Kalb said about KIC’s investment strategy:
“KIC is planning strategic investments based on a so-called barbell approach, investing in areas where there’s a ‘structural deficit’ in Korea’s economy such as natural resources, as well as industries that may have synergies in areas such as clean technology, he said.”
Kalb on the fund’s broad diversification strategy, which includes investments ranging from private equity in Africa to infrastructure in China:
“One of the lessons of 2008 is that you can’t just rely on the public markets and specifically very narrow definition of that for your portfolio because you’re not going to get enough diversification. The traditional space is going to be challenged for quite some time.”
Bloomberg reporting what Kalb said about KIC’s changing allocations:
“Sovereign funds and investors worldwide are diversifying their portfolios after the global financial crisis created high correlation across markets, Kalb said. He’s seeking to double alternative investments to about 20 percent of the portfolio from 10 percent, declining to give a specific time frame…
KIC is increasing its weighting both in public and non-traditional assets such as private equity and real estate in the developing world because of its prospects, Kalb said…
KIC has done a few infrastructure and real estate investments in China. It bought properties in other Asian markets, African private equity, and is currently looking at investments in India, Latin America, and more in China, he said…
Kalb also sees opportunities in credit, distressed debt, refinancing and restructuring across different assets ranging from private equity, real estate and infrastructure, he said. He is looking at opportunities in Japanese property because of its attractive yield, he said…
For its hedge-fund investments, macro strategy, which wagers on trends in stocks, bonds and currencies worldwide, has contributed the most to the return because of the highly correlated market environment, Kalb said, adding that he continues to favor the strategy.”
It seems to me as though Kalb is pushing the KIC in three directions: more strategic investing, more illiquid assets, and more diversification. Since all three take advantage of the SWF’s strategic advantages, I’m a fan.