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S.Korea's KIC to Resume Overseas Investment in 2009

The South Korean government will pump an additional $3 billion into the Korea Investment Corp (KIC) this month to enable the sovereign wealth fund to resume overseas investment, a finance ministry official said on Friday.

The ministry will inject another $2 billion into KIC from the foreign exchange stabilization fund later this year because the government wants to assign more assets to the wealth fund in the hope of making higher returns.

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"We are planning to sign a contract to entrust $3 billion to KIC around the end of June," the official said by telephone, asking not to be named ahead of the official signing.

Under the upcoming agreement, KIC will put one third of the new money, or $1 billion, into assets other than traditional investments such as bonds and stocks.

That would be the first time for the fund to buy foreign alternative assets since it bought $2 billion of shares in Merrill Lynch early last year.

KIC manages $25 billion in assets, including part of the country's foreign currency reserves and assets of the finance ministry.

Under the law, the wealth fund is not allowed to buy domestic assets, and parliament has yet to pass legislation to lift the ban.

The Maeil Business Newspaper, citing a senior KIC official, reported that the fund was considering alternative investments that would be made jointly with private equity firms and financial services companies.

"(KIC) is studying a variety of investment options, including leveraged buyouts, distressed asset purchases and venture capital," the official was quoted as saying.

The fund has shied away from foreign assets since KIC's $2 billion investment in Merrill Lynch reportedly suffered heavy losses.

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A spokesman for the KIC said its alternative investments would be made through securitised or structured commodities or real estate products, including real estate investment trusts.

Separately, KIC said in a statement that it had signed memorandums of understanding with Australia's QIC, an institutional investment manager, and Khazanah Nasional Berhad, the investment holding arm of the Government of Malaysia to cooperate in future investments.

South Korea's National Pension Service (NPS), which manages $200 billion in assets, said last month it planned to start overseas investments again, since the won currency stabilized after the sharp decline late last year.