The Dutch pension asset manager's Asia Pacific head of real estate says his team has just had one of its busiest years ever and that 2021 is looking similarly promising.
To date, the KIC has not had exposure to alternatives; its assets have gone primarily to global equities and fixed-income. Its sole private investment has been a $2 billion stake in Merrill Lynch, acquired at the beginning of the year. LeeÆs division will oversee strategic deals as well.
He oversees a team of six other investment professionals and expects this number to rise over time. Lee reports to Guan Ong, CIO.
The Ministry of Strategy and Finance and the Bank of Korea have agreed to add new capital to KIC next year. LeeÆs team will manage assets only from the governmentÆs portion, as these are longer term in nature. Next year the government will add around $5 billion to KICÆs coffers, of which 10-20% will be allocated to alternative investments.
Over time, LeeÆs remit is to build a portfolio based around private real estate and private equity. But for the short term, the team will be more opportunistic. This is partly because the initial modest size of its assets makes diversification difficult. Secondly, it is a new team, and will take time to develop the necessary relationships with top-tier private-equity fund managers.
But the third reason is the most compelling: right now, mass deleveraging and asset devaluation has created unique opportunities in areas such as secondary private equity and distressed situations.
That said, LeeÆs biggest project may prove to be the Merrill stake. KIC initially bought preferred shares with a 9% guaranteed dividend every year till 2010, when these shares were meant to be converted to common stock.
From January to September, the KIC has suffered a capital loss of $800 million as MerrillÆs stock value tumbled. The sovereign wealth fund then renegotiated with Merrill for an early conversion of its invested shares to common stock, so that KIC could regain its principal and remain the second-largest shareholder (after Temasek). Its share has since been diluted under MerrillÆs subsequent fire-sale acquisition by Bank of America.
Lee declined to comment on this matter, but says the government is committed to the KIC and its mission, and that is why its AUM is being augmented.
But he brings plenty of experience to this challenging role. Lee began his career as an emerging-markets analyst at the International Finance Corporation, the private-sector arm of the World Bank, in Washington, DC.
In 1997 he returned to his native land to run overseas investments at Samsung Life Insurance, which included running private-equity funds. (Lee was profiled in this capacity in AsianInvestor magazine in 2001.) In 2002 he joined a venture-capital start-up, STIC, conducting technology-oriented private equity deals. For the past 18 months he has been on the investment banking side, working for a domestic boutique that serviced local mid-sized companies.
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