Eager not to miss a rare window for outsized gains, heavyweight global investors, from sovereign wealth funds to family offices and university endowments, are rushing to mandate South Korean hedge fund managers, hoping to ride the rally that has made the Kospi the world’s best-performing stock index this year.
According to investment banking sources on Friday, Iconiq Capital, which is the family office managing Meta Chief Executive Mark Zuckerberg’s personal fortune, fired the opening shot early this year by entrusting about 100 billion won ($70 million) each to QUAD Investment Management and VIP Asset Management for Korean equity strategies.
The Abu Dhabi Investment Authority (ADIA), the sovereign wealth fund of the United Arab Emirates, followed soon after, allocating 300 billion won in Korean assets in March.
In August, US hedge fund giant Millennium Management mandated 374.6 billion won to Billionfold Asset Management in Seoul.
American university endowments have joined the race as well.
The MIT endowment’s officials reportedly met with Korean policymakers and local fund houses, including QUAD, earlier this month in Korea to discuss the country’s so-called value-up initiative aimed at boosting local corporate valuations.
GVA Asset Management is also in talks with a large US university endowment, which manages as much as 50 trillion won in assets, over potential allocations to Korean markets, according to industry officials.
GLOBAL CAPITAL CHASES KOREA’S VALUE STORY
The rush underscores growing conviction that Korea’s long-undervalued equities are finally breaking out of their discount.
With the government advancing corporate law reforms reminiscent of Japan’s value-up campaign, global investors see a structural opportunity – not just a fleeting rally – in Seoul’s market.
The surge of smart money reflects faith in Korea’s own value-up agenda, an effort to narrow the chronic valuation gap between Korean firms and global peers.
President Lee Jae Myung’s administration and the ruling party are pushing measures to mandate share cancellations after buybacks and to lower dividend tax rates, moves expected to unlock greater shareholder value.
Foreign institutions are tailoring their allocations accordingly.
Some are backing long-only funds focused on value and dividend plays, while others favor long-short strategies seeking steady absolute returns.
Local hedge funds, for their part, are ramping up marketing overseas to attract global limited partners seeking faster exposure to the Korean stocks’ rally.
“Inquiries from abroad have spiked,” said an executive at a Seoul-based asset manager. “Global investors are rushing to ask for introductions to Korean managers, suggesting that they’re under pressure to increase exposure to Korean equities quickly.”
FOREIGN FAITH, LOCAL RELUCTANCE
Ironically, while foreign institutional investors pour into Korean hedge funds, the country’s own pension giants remain on the sidelines.
After high-profile scandals at Lime Asset Management and Optimus Asset Management led to massive investor losses in 2019 and 2020, tighter risk controls have effectively barred local institutions from allocating to domestic hedge funds.
Industry executives say it’s time for that to change, or Korea’s public pension schemes risk missing a rare chance for superior returns.
“Even Norway’s sovereign wealth fund is entrusting capital to Korean managers like QUAD and VIP,” said one Korean fund manager. “Yet our own public funds, like the National Pension Service and Korea Post, continue mandating money only to overseas hedge funds.”
The Kospi extended its winning streak to a third straight day on Friday, closing at a fresh record 4,107.50.
Both domestic and global brokerage houses have turned increasingly bullish on Korean equities, with JP Morgan recently lifting its 12-month target for the index to 5,000, citing an AI-fueled semiconductor boom and Seoul’s corporate governance reforms.
The US bank even suggested the Kospi could climb as high as 6,000 in a full-blown bull run.
