Investing on the 38th parallel
Marc Faber reckons that if and when permission comes and the local hedge fund community starts to grow, Seoul may become a strong market for alternatives, as long as it can provide low volatility returns. Faber questioned, though, whether minted Korean investors should seek to invest in funds that have local trading strategies, or seek to invest with overseas managers with foreign portfolios ("and lose their money there").
Speaking at AsianInvestor's Third Annual Korea Institutional Investment Forum last week, keynote speaker Faber elaborated on his conviction that although markets may have bottomed, due to the amount of money being printed in the leading market economies, our investments and currency won't be worth much.
The forum was also led by two panel discussions. The first considered the appetite for alternative investments including private equity, commodities and infrastructure by institutional investors. It was moderated by Jake Kang, executive director of UBS Hana Asset Management, and on the panel were: Dong-Ik Lee, head of the alternative investment team of Korea Investment Corporation; Heeseok Kim, head of global investment for the National Pension service; Sung Soo Kim, senior manager (alternative investment team) Government Employee Pension Service; Seop Kim deputy director of the Employment Insurance Policy Division of the Ministry of Labour; and YK Park, senior sustainability specialist at APG Asset management.
The preference voiced by the panel leant distinctly towards illiquid styles of alternative investment, private equity, property and infrastructure foremost, though the investors at the Korea Investment Corporation are seeing opportunities in leveraged loans and American core real estate.
In the second panel, which discussed hedge fund investments, the moderator Peter Douglas of GFIA was joined by Faber as well as: Jungdoo Suh, managing director and head of global investment at Korea Investment Trust Management; James Young, executive director of Tong Yang Investment Management; and Hee Jin Noh, senior research fellow at the Korea Capital Market Institute (who spoke separately about developing green finance in Korea's capital markets).
Opinion was mixed on whether the world is entering a hedge fund renaissance. Investors still felt a sense of trepidation about investing in hedge funds, (though if you had pulled out investments at the end of 2008, you would have missed a 25% bounce in the Korea markets). Also, there remains a hiatus while the question over distribution of hedge funds and the investors qualified to invest money with them remains.
In other highlights, a number of presentations were given to the audience by Tony Edwards, senior vice-president and senior portfolio manager at Alliance Bernstein, who spoke on the subject of capturing the opportunities within the US Government's public, private investment programme.
Duncan Klein, executive director and head of transition management Asia at JP Morgan, spoke about the role of a transition manager in delivering value during a transition. Eric Van der Maarel, executive vice-president and general manager, described the role of CTAs as a risk diversifier in a balanced portfolio strategy.
Carl Moss, senior investment officer at Intech, sought to compare active versus passive investment solutions. Ilex Lam, CEO of BEA Union Investment Management, gave a presentation about the value of quantitative portfolio management. John Lau, head of Investments at SEI (Asia) looked at how managers of managers are responding to the new global environment.
Marco Montanori, head of ETF product management for Deutsche Bank, appraised the state of play for the exchange-traded funds market. Finally, Austin Kweon, head of retirement and benefits consulting at Hewitt Associates in Seoul, gazed into the future of corporate pensions and capital markets.
[Editor's note: According to Wikipedia, the 38th parallel was first suggested as a dividing line for Korea in 1902, when Russia was attempting to pull Korea under its control while Japan had just secured recognition of its rights in Korea from the British.]